Millar Transportation Company purchased a truck to use for deliveries and is attempting to determine how much depreciation expense would be recognized under three different methods. The truck cost $200,000 and is expected to have a value of $40,000 at the end of its five-year life. The truck is expected to be used at the rate of 10,000 kilometers in the first year, 20,000 kilometers in the second and third years, and 15,000 kilometers in the fourth and fifth years. East adopts the cost model as its accounting policy in subsequently measuring its tangible assets.

Required:

(a) Determine the amount of depreciation expense that will be recognized under each of the following depreciation methods for the trucks useful life of 5 years. A full years depreciation will be recognized in the first year the truck is used.

i. Straight-line

ii. Double-declining balance

iii. Units of output (based on kilometers)

	Straight-line		Double-declining balance			Unit of output#
	Depreciation amount	Accumulated depreciation	Depreciation amount	Accumulated depreciation		Depreciation amount	Accumulated depreciation
Year 1
Year 2
Year 3	32,000	96,000	72000*40% 28,800	156,800		40000	100,000
Year 4	32,000	128,000	(43200-40000)/2 1,600		158,400	160000*1.5/8 30000	130,000
Year 5	32,000	160,000	1,600	160,000		300000	160,000

# total estimated km = 10,000+20,000+20,000+15000+15000=80,000 km

(b) Using method (ii), prepare adjusting entries at each year end of Year 1 and Year 2

31 Dec. Year 1

Depreciation expense
Accumulated depreciation- Motor vehicle

31 Dec. Year 2

Depreciation expense
Accumulated depreciation- Motor vehicle