A retailer purchased a delivery wagon for $21 000 on 1 July 2014.It was planned to keep the vehicle until it had done 60 000 kilometres and then to trade it in.The expected trade in value was $6000.
Schedule of actual distance travelled was:
30/6/15 20 000 km
30/6/16 15 000 km
30/6/17 15 000 km
30/6/18 10 000 km
Using the units-of-production method the amount of depreciation charged for the year ended 30 June 2018 was:

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on usage. The total depreciation is $21,000 - $6,000 = $15,000 over 60,000 km, which is $0.25 per km. For the year ended 30 June 2018, the vehicle traveled 10,000 km, so the depreciation is 10,000 km * $0.25/km = $2,500.

A Retailer Purchased a Delivery Wagon for $21 000 on 1