Question

Fernandez Corporation purchased a truck at the beginning of 2020 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2020 and 31,000 miles in 2021. Compute depreciation expense using the units-of-production method for 2020 and 2021.

Answer 1

Answer:

Annual depreciation 2020= 6,900

Annual depreciation 2021= 9,300

Explanation:

Giving the following information:

Fernandez Corporation purchased a truck at the beginning of 2020 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2020 and 31,000 miles in 2021.

Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced

Annual depreciation 2020= (48,000/160,000)*23,000= 6,900

Annual depreciation 2021= (48,000/160,000)*31,000= 9,300