On January 1, 2016, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. Wasson uses the units-of-production depreciation method and Wasson estimates that the vehicle will be driven 100,000 miles. What is the vehicle's book value as of December 31, 2017 assuming the vehicle was driven 10,000 miles during 2016 and driven 18,000 miles during 2017?

Question

Quizplus · Accepted Answer

The correct answer is A.The vehicle's book value as of December 31, 2017 is $29,920. This is calculated by taking the original cost of the vehicle ($40,000) and subtracting the accumulated depreciation ($10,080). The accumulated depreciation is calculated by multiplying the depreciation rate (40,000 - 4,000) / 100,000 = $0.36 per mile) by the number of miles driven (10,000 miles in 2016 and 18,000 miles in 2017).

On January 1, 2016, Wasson Company Purchased a Delivery Vehicle