Question

Gardner Corporation purchased a truck at the beginning of 2012 for $90,000. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles.
It was driven 18,000 miles in 2012 and 32,000 miles in 2013.

What is the depreciation expense for 2012?

a. $13,500b. $12,960c. $21,600d. $36,000

Answer 1

Answer:

Option (b) $12,960

Explanation:

Data provided in the question:

Cost = $90,000

Salvage value = $3,600

Useful life = 120,000 miles

Number of miles driven in 2012 = 18,000

Number of miles driven in 2013 = 32,000

Now,

Using the straight line method of depreciation

Rate of annual depreciation = [ Cost - Salvage value ] ÷ Useful life

= [ $90,000 - $3,600 ] ÷ 120,000

= $0.72 per mile

Therefore,

The depreciation expense for 2012

= Rate of annual depreciation × Number of miles driven in 2012

= $0.72 per mile × 18,000

= $12,960

Hence,

Option (b) $12,960