Answer:
Depreciation expense for 2018 is $6,300.
Depreciation expense for 2019 is $7,700.
Explanation:
The unit-of-production method also known as units-of-activity method is used when the asset value closely relates to the units of output it is able to produce. It is expressed with the formula below:
(Original Cost - Salvage value) / Estimated production capacity x Units/year
At Year 2018, depreciation expense (DE) is: ($45,000 - $10,000) / 100,000 miles x 18,000 miles = $6,300/year
At Year 2019, depreciation expense (DE) is: ($45,000 - $10,000) / 100,000 miles x 22,000 miles = $7,700/year
Accumulated depreciation for 2 years is $6,300 + $7,700 = $14,000.
Note that this depreciation method results in higher depreciation charge when the asset is heavily used, at this time, it was in Year 2019.
The NBV under this method is: $45,000 - $14,000 = $31,000.
