On January 1, Year 1, Friedman Company purchased a truck that cost $27,000. The truck had an expected useful life of 100,000 miles over 8 years and a $7,000 salvage value. During Year 2, Friedman drove the truck 38,000 miles. The company uses the units-of-production method. The amount of depreciation expense recognized in Year 2 is: (Do not round intermediate calculations.)

Question

Quizplus · Accepted Answer

The depreciation expense under the units-of-production method is calculated based on the actual usage of the asset. First, calculate the depreciation rate per mile: ($27,000 - $7,000) / 100,000 miles = $0.20 per mile. Then, for Year 2, the depreciation expense is 38,000 miles * $0.20/mile = $7,600.

On January 1, Year 1, Friedman Company Purchased a Truck