Question 3 (12 marks)

Part 1

Explain why depreciation is not a method of determining an assets declining value or a matter of valuation. (6 marks)

Part 2

A transportation truck that cost $500,000 is acquired on March 1, 2019. The estimated residual value is $100,000, expected life is 10 years or 2,000,000 km.

Instructions

Calculate the depreciation expense by each of the following methods, you may round the expense to the nearest dollar:

1. Straight-line for 2019 (1 mark)
2. Activity-based for 2019. Milage accumulated at year-end was 200,000 km (2 marks)
3. Double declining for 2020. (3 marks)

Please answer all parts.