Rapid Deliveries purchased a delivery truck on July 1, 2012, at a cost of $16,800. The truck has an estimated useful life of 4 years or 40,000 miles and a salvage value of $1,200. If the truck was driven 5,200 miles during 2012, the depreciation expense for 2012 under the units-of-production method would be

Question

Quizplus · Accepted Answer

We need to calculate the depreciation per mile first:

Total mileage = 40,000 – 1,200 = 38,800 miles
Depreciation per mile = (Cost – Salvage value) / Total mileage 
= ($16,800 – $1,200) / 38,800 miles 
= $15,600 / 38,800 miles 
= $0.40/mile

Depreciation for 2012 = Depreciation per mile x Total miles driven in 2012 
= $0.40/mile x 5,200 miles 
= $2,080

Therefore, the depreciation expense for 2012 under the units-of-production method would be $2,028.

Rapid Deliveries Purchased a Delivery Truck on July 1, 2012