Question

A truck costs $ 303 comma 000 and is expected to be driven 114 comma 000 miles during its fiveminusyear life. Residual value is expected to be zero. If the truck is driven 34 comma 000 miles during the first​ year, how much depreciation should the business record under the unitsminusofminusproduction ​method? (Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​ dollar.)

Answer 1

$90,900

Step-by-step explanation:

Cost of truck = $303,000

Expected millage = 114,000 miles

Residual value = 0

Millage cover in first year = 34,000 miles

Depreciation is the systematic allocation of cost to an asset based on usage.

The depreciation of this truck is based on the millage covered. Hence the depreciation to be recognized in the first year

= (34,000/114,000) × 303,000

= 0.30 × 303,000 (intermediate calculations rounded to two decimal​ places)

= $90,900 (to the nearest dollar)