Question

On January 1, 2014, Wasson Company purchased a delivery vehicle costing $53,950. The vehicle has an estimated 6-year life and a $4,900 residual value. Wasson estimates that the vehicle will be driven 109,000 miles. What is the vehicle's book value as of December 31, 2015 assuming Wasson uses the units-of-production depreciation method and the vehicle was driven 10,900 miles during 2014 and 18,900 miles during 2015? (Do not round your intermediate calculations.)

Answer 1

2014 : 4,905

2015 : 8,505

Step-by-step explanation:

First, we will calculate the amount subject to depreciation

acquisition - salvage

53,950 - 4,900 = 49,050

Now we will divide by the total millage and multiply by the miles driven during each year.

Notice we are not allowed to round up, the calculation of a rate will do round up, so we need to calculate in a single step.

Depreciation for 2014

49,050 x (10,900/109,000) = 4,905

Depreciation for 2015

49,050 x (18,900/109,000) = 8,505