A company purchased a van at a cost of $42,000 and expects it can be sold for $6,000 after 120,000 miles of service. Assuming the units-of-production method is used and the van is driven for 24,000 miles during the first year, the depreciation at the end of the first year would be

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Quizplus · Accepted Answer

The depreciation per mile can be calculated as follows:
Depreciation per mile = (Cost - Salvage value) / Total estimated miles
Depreciation per mile = ($42,000 - $6,000) / 120,000 = $0.3 per mile

Therefore, the depreciation for 24,000 miles can be calculated as:
Depreciation for first year = Depreciation per mile * Miles driven in first year
Depreciation for first year = $0.3/mile * 24,000 miles = $7,200

Therefore, the depreciation at the end of the first year is $7,200.

A Company Purchased a Van at a Cost of $42,000