Question

Waterway Corporation purchased a truck at the beginning of 2020 for $59,500. The truck is estimated to have a salvage value of $2,380 and a useful life of 190,400 miles. It was driven 27,370 miles in 2020 and 36,890 miles in 2021. Compute depreciation expense using the units-of-production method for 2020 and 2021.

A. Depreciation expense for 2020
B. Depreciation expense for 2021

Answer 1

In 2020: $ 8,211 and in 2021: $ $11,067

Step-by-step explanation:

In the units-of-production method, the cost of depreciation is dependent of the asset usage. Depreciation is spread across the units produced.

for waterway corporation:

Cost price = $59,500

salvage value $2,380

useful life 190, 000 miles

Depreciable value: Cost price- salvage value

=59,500-2380

=57,120

Depreciation per unit= Depricable cost / by expected mileage

= $57,120/190,000

=$0.30 per unit

Depreciation in 2020: usages x depreciation rate

=27,370 x 0.30

=$8,211

Depreciation in 2021: 36,890 x0.30

=In the units-of-production method, the cost of depreciation is dependant of the asset usage. Depreciation is spread across the units produced.

for waterway corporation:

Cost price = $59,500

salvage value $2,380

useful life 190, 000 miles

Depreciable value: Cost price- salvage value

=59,500-2380

=57,120

Depreciation per unit= depricable cost / by expected mileage

= $57,120/190,000

=$0.30 per unit

Depreciation in 2020: usages x depreciation rate

=27,370 x 0.30

=$8,211

Depreciation in 2021: 36,890 x0.30

=$11,067