On January 1, Year 1, Friedman Company purchased a truck that cost $48,000. The truck had an expected useful life of 100,000 miles over 8 years and an $8,000 salvage value. During Year 2, Friedman drove the truck 18,500 miles. The company uses the units-of-production method. The amount of depreciation expense recognized in Year 2 is:

Question

Quizplus · Accepted Answer

To calculate depreciation expense using the units-of-production method, we need to follow these steps:

Step 1: Calculate the depreciation cost per unit
Depreciation cost per unit = (Cost - Salvage value) / Total units of production
Depreciation cost per unit = ($48,000 - $8,000) / 100,000 miles
Depreciation cost per unit = $0.40/mile

Step 2: Multiply the depreciation cost per unit by the number of units of production for the year
Depreciation expense for Year 2 = Depreciation cost per unit × Number of units produced in Year 2
Depreciation expense for Year 2 = $0.40/mile × 18,500 miles
Depreciation expense for Year 2 = $7,400

Therefore, the amount of depreciation expense recognized in Year 2 is $7,400. Option B is correct.

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