Question

Grover Corporation purchased a truck at the beginning of 2017 for $109,200. The truck is estimated to have a salvage value of $4,200 and a useful life of 120,000 miles. It was driven 21,000 miles in 2017 and 29,000 miles in 2018. What is the depreciation expense for 2018?a. $27,405b. $7,000c. $25,375d. $43,750

Answer 1

Answer:

The depreciation expense for 2018: c. $25,375

Explanation:

Grover Corporation uses the units-of-production depreciation method. Depreciation expense is calculated  by the following formula:

Depreciation Expense = [(Cost of asset − Salvage Value )/Life in Number of Units

] x Number of Units Produced = Depreciation Expense per unit x Number of Units Produced

In the company,

Depreciation Expense per mile = ($109,200-$4,200)/120,000=  $0.875

The truck was driven 29,000 miles in 2018, so the depreciation expense for  2018: $0.875 x 29,000 = $25,375