Speedy Delivery Company purchases a delivery van for $28,000. Speedy estimates that at the end of its four-year service life, the van will be worth $4,000. During the four-year period, the company expects to drive the van 120,000 miles.
Required:
Calculate annual depreciation for the four-year life of the van using each of the following methods. Round all amounts to the nearest dollar.
1. Straight-line.
2. Double-declining-balance.
3. Activity-based.
Actual miles driven each year were 33,000 miles in year 1; 36,000 miles in year 2; 28,000 miles in year 3; and 30,000 miles in year 4. Actual total miles of 127,000 exceed expectations by 7,000 miles.