A company paid $17,000 for a vehicle that had an estimated useful life of 4 years,total capacity of 100,000 miles,and a residual value of $1,000.After 2 full years of using the vehicle (20,000 miles in year 1 and 27,000 miles in year 2),the company sold the vehicle for $6,000 and reported a loss on disposal of $3,480.What method of depreciation did the company use?
A)Units-of-production method
B)Double-declining-balance method
C)Straight-line method
D)None of the answers are acceptable

Question

Quizplus · Accepted Answer

Book Value at time of disposal = Market Value + Loss on disposal Book Value at time of disposal = $6,000 + $3,480 Book Value at time of disposal = $9,480 Accumulated Depreciation at time of disposal = Cost - Book Value Accumulated Depreciation at time of disposal = $17,000 - $9,480 Accumulated Depreciation at time of disposal = $7,520 Units of production method: Cost - residual value * actual production this period/estimated total production Year 1: ($17,000 - $1,000)* (20,000/100,000)= $3,200 + 4,320 = 7,520.

A Company Paid $17,000 for a Vehicle That Had an Estimated