On January 1, 2014, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. Wasson estimates that the vehicle will be driven 100,000 miles. What is the vehicle's book value as of December 31, 2015 assuming Wasson uses the units-of-production depreciation method and the vehicle was driven 10,000 miles during 2014 and 18,000 miles during 2015?

Question

Quizplus · Accepted Answer

Depreciation expense for 2014 = ($40,000 - $4,000) x (10,000 miles / 100,000 miles) = $3,600Depreciation expense for 2015 = ($40,000 - $4,000) x (18,000 miles / 100,000 miles) = $5,760Book value as of December 31, 2015 = $40,000 - $3,600 - $5,760 = $29,920

On January 1, 2014, Wasson Company Purchased a Delivery Vehicle