Bangor Industries purchased a car for $22,000 on January 1, 20A. The car had an estimated useful life of 80,000 kilometres and an estimated residual value of $4,000. In the second year of ownership (20B), the car was driven 25,000 kilometres. Using the units-of-production method, what was the amount of depreciation expense for 20B?
A) $5,000
B) $6,875
C) $4,500
D) $5,625

Question

Quizplus · Accepted Answer

The depreciation expense is calculated as: (Cost - Residual Value) / Total Estimated Kilometres * Kilometres Driven in Year. So, ($22,000 - $4,000) / 80,000 * 25,000 = $5,625.

Bangor Industries Purchased a Car for $22,000 on January 1