Philips Corporation purchased a truck that cost $26,000. The company expected to drive the truck 100,000 miles. The truck had an estimated salvage value of $2,000. If the truck is driven 36,000 miles in the current accounting period, which of the following amounts should be recognized as depreciation expense?

Question

Quizplus · Accepted Answer

To calculate depreciation expense, we need to use the following formula:

Depreciation expense = (Cost of asset - Salvage value) / Estimated total miles * Miles in current period

Using the values given in the question:

Depreciation expense = ($26,000 - $2,000) / 100,000 miles * 36,000 miles 
Depreciation expense = $24,000 / 100,000 miles * 36,000 miles
Depreciation expense = $8,640

Therefore, the correct answer is (D) $8,640.

Philips Corporation Purchased a Truck That Cost $26,000