On January 24, Bora Co. purchased a delivery van for $22,000. Bora expects to drive the van for approximately 5 years or 100,000
miles, before disposing of it for an estimated salvage value of $2,000. During the first year, Bora drives the van for 18,000 miles. How much would depreciation expense be if Bora uses the units-of-production depreciation method?
Depreciation is the systematic allocation of cost of an asset to he income statement. the amount of depreciation to be recorded is based on the proportion of the total miles that was covered in the first year.
The ratio of the miles covered in the first year to the miles to be covered over the useful life of the asset multiplied by the asset's depreciable value gives the depreciation.
