On January 1,Luke Denton Co.purchased a truck for $125,000 which has an estimated productive life of 100,000 miles.Its residual value is $12,500.During the first full year of its useful life,the company drove the truck 25,000 miles.Its depreciation expense for the year using the units of production method is:
A)$22,500.
B)$25,000.
C)$28,125.
D)$31,250.

Question

Quizplus · Accepted Answer

Depreciation expense = (Cost − Residual value)× (Actual production this period ÷ Estimated total production)
= ($125,000 − $12,500)× (25,000 ÷ 100,000)= $28,125