Two Brother's Moving Company purchased a group of new moving trucks for a total amount of $125,000. The vehicles are expected to last five years due to the heavy use and have a residual/scrap/salvage...

Two Brother's Moving Company purchased a group of new moving trucks for a total amount of $125,000. The vehicles are expected to last five years due to the heavy use and have a residual/scrap/salvage value of $10,000 at the end of that life. Usage of the vehicle is tracked in miles and the vehicles in total are expected to last 2,000,000 miles. During year one 750,000 miles were used, during year two 600,000 miles were used, during year three 500,000 miles were used, during year four no miles were used due to a temporary closing of the moving line of business, and during year five 150,000 miles were used. Using the depreciation template provided, determine the amount of depreciation expense for the third year under each of the following assumptions:

1. The company uses the straight-line method of depreciation.


2. The company uses the units-of-production method of depreciation.


3. The company uses the double-declining-balance method of depreciation.

1. Assuming straight line depreciation, prepare the journal entry for the third year.


2. Assume the company sold the vehicles at the end of the fourth year for $50,000. Prepare a journal entry for asset disposal in the fourth year.


3. Assume you are the chief accountant of this company. Determine how you will choose, based on best industry practices, the depreciation method for them to use.

Straight-Line Depreciation ACT300 Principles of Accoutning I Module 6: Critical Thinking Template Option 1 (Depreciation Template) Straight-Line DepreciationInput amounts Record journal entry for depreciation expense for the third year: Cost$0 Salvage value0DebitCredit Depreciable cost$0Dec. 31Depreciation Expense Useful life 0years Accumulated Depreciation - Equipment Useful life in units of production0To record annual depreciation Record journal entry for asset disposal in the fourth year: Straight line method Formula Cost - Salvage Value ** Depreciable cost = Cost - Salvage ValueDebitCredit Useful life in yearsDec. 31Cash Accumulated Depreciation =0Loss on disposal Equipment To record disposal of equipment Annual depreciation expense=0 Also, compute the straight line depreciation rate. The formula is 100% divided by the useful life in years Compute the straight line depreciation rate below: 0% 0 Straight line depreciation rate#DIV/0! Depreciation for the PeriodEnd of Period Annual periodDepreciable CostDepreciation rateDepreciation ExpenseAccumulated DepreciationBook Value * Year 1 Year 2 Year 3 Year 4 Year 5** * Cost of machine ** Salvage value is not depreciated Units-of-Production ACT300 Principles of Accoutning I Module 6: Critical Thinking Template Option 1 (Depreciation Template) Units of Production DepreciationInput amounts Cost$0 Salvage value0Record journal entry for depreciation expense for the third year: Depreciable cost$0 Useful life 0years Useful life in units of production =0DebitCredit Dec. 31Depreciation Expense Accumulated Depreciation - Equipment Units of ProductionTo record annual depreciation Step 1: Depreciation per unitCost - Salvage Value ** Depreciable cost = Cost - Salvage ValueRecord journal entry for asset disposal in the fourth year: Useful life in units of production DebitCredit Dec. 31Cash Accumulated Depreciation Loss on disposal Depreciation per unit = $ - 0 Equipment To record disposal of equipment Step 2: Depreciation expenseDepreciation per unit x Units of production* =0.00x0 Depreciation expense =$ - 0 Depreciation for the PeriodEnd of Period Annual periodNumber of UnitsDepreciation per unitDepreciation ExpenseAccumulated DepreciationBook Value $0* Year 3 * Cost of item ** Salvage value is not depreciated Double-Declining Balance ACT300 Principles of Accoutning I Module 6: Critical Thinking Template Option 1 (Depreciation Template) Double Declining Balance DepreciationInput amounts Cost$0 Salvage value0Record journal entry for depreciation expense for the third year: Depreciable cost$0 Useful life 0years Useful life in miles0DebitCredit Dec. 31Depreciation Expense Accumulated Depreciation - Equipment Units of ProductionTo record annual depreciation Step 1: Straight Line Rate =100%* Depreciable cost = Cost - Salvage Value Useful life in years Straight line depreciation rate = Step 2: Double-declining-balance rate2 x Straight-line rate =2x0% Double-declining-balance rate0% Step 3: Depreciation expenseDouble-Declining- balance rate x Beginning-period book value =0%x$0 Depreciation expense$0 Depreciation for the PeriodEnd of Period Annual periodBeginning of Period Book ValueDepreciation RateDepreciation ExpenseAccumulated DepreciationBook Value $0* Year 1 Year 2 Year 3 Year 4 Year 5 * Cost of equipment