Question

On January 1, Year 1, Friedman Company purchased a truck that cost $48,000. The truck had an expected useful life of 100,000 miles over 8 years and an $8,000 salvage value. During Year 2, Friedman drove the truck 18,500 miles. The amount of depreciation expense recognized in Year 2 assuming that Friedman uses the units-of-production method is:__________.a. $8,880b. $7,400c. $6,000

Answer 1

b. $7,400

Step-by-step explanation:

The computation of the depreciation expense for year 2 under the units-of-production method is shown below:

= (Original cost - residual value) ÷ (estimated useful miles)

= ($48,000 - $8,000) ÷ (100,000 miles)

= ($40,000) ÷ (100,000 miles)

= $0.40 per mile

Now for the second year, it would be

= Production miles in second year × depreciation per bolts

= 18,500 miles × $0.40 per mile

= $7,400