Speedy Ltd purchased a delivery truck on 1 July 2014 for $450 000.It had an estimated salvage value of $150 000.The estimated number of kilometres to be driven was 150 000 km.The truck was depreciated using the units-of-production method.Speedy Ltd's financial period ends on 31 December.The truck was driven the following distances: during 6 months to 31 December 2014,25 000 km;during 12 months to 31 December 2015,75 000 km;and during 12 months to 31 December 2016,40 000 km.
-What was the balance of accumulated depreciation at 31 December 2015?

Question

Quizplus · Accepted Answer

The calculation of depreciation expense is as follows:

Depreciation per kilometer = (Cost - Salvage value) / Estimated number of kilometers
Depreciation per kilometer = ($450,000 - $150,000) / 150,000 km
Depreciation per kilometer = $3/km

Depreciation expense for 2014 (6 months) = 25,000 km x $3/km = $75,000
Depreciation expense for 2015 = 75,000 km x $3/km = $225,000
Total accumulated depreciation at 31 December 2015 = $75,000 + $225,000 = $300,000

Therefore, the correct answer is B) $200,000.

Speedy Ltd Purchased a Delivery Truck on 1 July 2014