On January 1, Year 1, Friedman Company purchased a truck that cost $40,000. The truck had an expected useful life of 200,000 miles over 8 years and an $8,000 salvage value. During Year 2, Friedman drove the truck 19,000 miles. Friedman uses the units-of-production method. What is depreciation expense in Year 2? (Round your intermediate calculations to 3 decimal places.)

Question

Quizplus · Accepted Answer

Under the units-of-production method, depreciation expense is calculated as (cost - salvage value) ÷ expected total production in units × actual production in units.

Expected total production = 200,000 miles 
Cost = $40,000 
Salvage value = $8,000 
Depreciable cost = $40,000 - $8,000 = $32,000

Depreciation rate per mile = Depreciable cost ÷ expected total production = $32,000 ÷ 200,000 = $0.16 per mile

Depreciation expense in Year 2 = Depreciation rate per mile × actual production in units 
= $0.16 × 19,000 miles = $3,040

Therefore, the correct answer is B.

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