Question

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. Marino planned to drive the truck for 100,000 miles and then to sell it. The truck was expected to have an $8,000 salvage value. The truck was actually driven 40,000 miles during Year 1, 20,000 miles during Year 2, 35,000 miles during Year 3 and 10,000 miles during Year 4. If Marino uses the units-of-production method, the amount of accumulated depreciation shown on the Year 3 balance sheet isa- $38,000.b- $40,000.c- $24,000.d- $24,000.

Answer 1

The amount of accumulated depreciation shown on the Year 3=$38,000

Step-by-step explanation:

Depreciable cost=asset cost-salvage value

where;

asset cost=$48,000

salvage value=$8,000

replacing;

depreciable cost=48,000-8,000=$40,000

The depreciation rate per unit=depreciable cost/planned number of units

where;

depreciable cost=$40,000

planned number of units=100,000 miles

replacing;

depreciation rate per unit=40,000/100,000=$0.4 per mile

depreciation expense for year 1=depreciation rate per unit×actual miles driven

depreciation rate per unit=$0.4

actual miles driven=40,000 miles

replacing;

depreciation expense for year 1=(0.4×40,000)=$16,000

depreciation expense for year 2=depreciation rate per unit×actual miles driven

depreciation rate per unit=$0.4

actual miles driven=20,000 miles

replacing;

depreciation expense for year 2=(0.4×20,000)=$8,000

depreciation expense for year 3=depreciation rate per unit×actual miles driven

depreciation rate per unit=$0.4

actual miles driven=35,000 miles

replacing;

depreciation expense for year 3=(0.4×35,000)=$14,000

depreciation expense for year 4=depreciation rate per unit×actual miles driven

depreciation rate per unit=$0.4

actual miles driven=10,000 miles

replacing;

depreciation expense for year 4=(0.4×10,000)=$4,000

Accumulated depreciation on year 3=depreciation expense for year 1+depreciation expense for year 2+depreciation expense for year 3

accumulated depreciation on year 3=(16,000+8,000+14,000)=$38,000

The amount of accumulated depreciation shown on the Year 3=$38,000