Question

Rover 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

Answer 1

Answer:

Annual depreciation= $25,375

Explanation:

Giving the following information:

Purchase price= $109,200

Salvage value= $4,200

Useful life in miles= 120,000

To calculate the depreciation expense, we need to use the units-of-activity method:

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

2018:

Annual depreciation= [(109,200 - 4,200) / 120,000]*29,000

Annual depreciation= 0.875*29,000

Annual depreciation= $25,375