Gardner Corporation purchased a truck at the beginning of 2010 for $75,000.The truck is estimated to have a residual value of $3,000 and a useful life of 120,000 miles.It was driven 18,000 miles in 2010 and 32,000 miles in 2011.What is the depreciation expense for 2011?

Question

Quizplus · Accepted Answer

To calculate the depreciation expense using the units-of-production method, we need to determine the total miles the truck is expected to be driven over its useful life and the depreciation rate per mile.

Total miles: 120,000 - 3,000 (residual value) = 117,000 miles

Depreciation rate per mile: ($75,000 - $3,000) / 117,000 miles = $0.64/mile

Depreciation expense for 2011: 32,000 miles driven in 2011 x $0.64/mile = $20,480

Since the truck was driven 18,000 miles in 2010, the depreciation expense for that year would be:

18,000 miles driven in 2010 x $0.64/mile = $11,520

Total depreciation expense for 2010 and 2011:

$11,520 + $20,480 = $32,000

Therefore, the best choice is C, $19,200.

Gardner Corporation Purchased a Truck at the Beginning of 2010