A retailer purchased a delivery wagon for $21 000 on 1 July 2010.It was planned to keep the vehicle until it had done 60 000 kilometres and then to trade it in.The expected trade in value was $6 000.
Schedule of actual distance travelled was: $$\begin{array} { l l }
30 / 6 / 11 & 20000 \mathrm {~km} \
30 / 6 / 12 & 15000 \mathrm {~km} \
30 / 6 / 13 & 15000 \mathrm {~km} \
30 / 6 / 14 & 10000 \mathrm {~km}
\end{array}$$
Using the units-of-production method the amount of depreciation charged for the year ended 30 June 2014 was:

Question

A retailer purchased a delivery wagon for $21 000 on 1 July 2010.It was planned to keep the vehicle until it had done 60 000 kilometres and then to trade it in.The expected trade in value was $6 000.
Schedule of actual distance travelled was: $$\begin{array} { l l } 
30 / 6 / 11 & 20000 \mathrm {~km} \
30 / 6 / 12 & 15000 \mathrm {~km} \
30 / 6 / 13 & 15000 \mathrm {~km} \
30 / 6 / 14 & 10000 \mathrm {~km}
\end{array}$$
Using the units-of-production method the amount of depreciation charged for the year ended 30 June 2014 was:

Quizplus · Accepted Answer

The total depreciation is $21,000 - $6,000 = $15,000 over 60,000 km. The rate is $15,000 / 60,000 km = $0.25 per km. For the year ended 30 June 2014, the vehicle traveled 10,000 km, so depreciation is 10,000 km * $0.25/km = $2,500.

A Retailer Purchased a Delivery Wagon for $21 000 on 1