A company purchased a van at a cost of $42,000 and expects its salvage value to be $6,000 after 100,000 miles of service. Using the units-of-production method, what is the first year's depreciation if the van is driven 30,000 miles? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

First, we need to find the depreciation rate per mile:
Depreciation per mile = (Cost - Salvage Value) / Total expected miles of service
Depreciation per mile = ($42,000 - $6,000) / 100,000 miles
Depreciation per mile = $0.36/mile

Then, we can find the first year's depreciation:
First year depreciation = Depreciation per mile x Miles driven in first year
First year depreciation = $0.36/mile x 30,000 miles
First year depreciation = $10,800

Therefore, the answer is C) $10,800.

A Company Purchased a Van at a Cost of $42,000