On January 1,2012,Gray Company purchased a new company car for $36,000.The car has an expected salvage value of $6,000.The company estimates that the car will be driven 100,000 miles over its life and uses units of production to determine depreciation expense.The car was driven 20,000 miles in 2012.At the beginning of 2013 the company revised the estimated total life to 120,000 miles.If 26,000 miles were driven in 2013,the amount of depreciation expense for the year would be

Question

Quizplus · Accepted Answer

First, we need to find out the total miles driven by the car up to the end of 2013:
Total miles driven = miles driven in 2012 + miles driven in 2013
Total miles driven = 20,000 + 26,000
Total miles driven = 46,000

Now we can calculate the depreciation rate per mile:
Depreciation rate per mile = (purchase cost - salvage value) / expected total miles
Depreciation rate per mile = ($36,000 - $6,000) / 100,000
Depreciation rate per mile = $0.30/mile

Using this depreciation rate, we can calculate the depreciation expense for 2013:
Depreciation expense = depreciation rate per mile x miles driven in 2013
Depreciation expense = $0.30/mile x 26,000 miles
Depreciation expense = $7,800

Therefore, the correct answer is C) $6,240.

On January 1,2012,Gray Company Purchased a New Company Car for $36,000.The