Question

Item 3 On January 1, Year 1, Friedman Company purchased a truck that cost $50,000. The truck had an expected useful life of 100,000 miles over 8 years and a $9,000 salvage value. During Year 2, Friedman drove the truck 26,000 miles. The company uses the units-of-production method. The amount of depreciation expense recognized in Year 2 is: (Do not round intermediate calculations.) Multiple Choice a. $13,000. b. $10,660. c. $5,125. d. $6,250.

Answer 1

The depreciation expense for Friedman Company's truck in Year 2 using the units-of-production method is $5,125. First, calculate the depreciation rate per mile, then multiply by the miles driven in Year 2 to find the depreciation expense.

Step-by-step explanation:

The amount of depreciation expense recognized in Year 2 for Friedman Company using the units-of-production method is $5,125. To calculate this, you first find the depreciation rate per mile by subtracting the salvage value from the cost and then dividing by the total expected mileage:

Depreciation rate per mile = (Cost - Salvage Value) / Total expected mileage

Depreciation rate per mile = ($50,000 - $9,000) / 100,000 miles

Depreciation rate per mile = $41,000 / 100,000 miles

Depreciation rate per mile = $0.41 per mile

Next, multiply this rate by the number of miles driven in Year 2:

Depreciation expense for Year 2 = Depreciation rate per mile × Miles driven in Year 2

Depreciation expense for Year 2 = $0.41/mile × 26,000 miles

Depreciation expense for Year 2 = $10,660

The correct answer is option b. $10,660.