Question

Gardner Corporation purchased a truck at the beginning of 2012 for $90,000. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 18,000 miles in 2012 and 32,000 miles in 2013. What is the depreciation expense for 2013?

A) $38,400
B) $36,000
C) $24,000
D) $23,040

Answer 1

The depreciation expense for 2013 is $23,360.

Step-by-step explanation:

To calculate the depreciation expense for 2013, we need to use the units-of-production method. This method calculates depreciation based on the number of miles driven.

First, we need to calculate the depreciation rate per mile. This is done by subtracting the salvage value from the initial cost and dividing by the total estimated miles of useful life. In this case, the depreciation rate per mile would be ($90,000 - $3,600) / 120,000 = $0.73 per mile.

Next, we multiply the depreciation rate per mile by the number of miles driven in 2013. In this case, the depreciation expense for 2013 would be $0.73 * 32,000 = $23,360.