Question

On January 1, 2017, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 3-year life and a $4,000 residual value. Wasson estimates that the vehicle will be driven 72,000 miles.

What is the vehicle's depreciation expense for the year ended December 31, 2019, assuming Wasson uses the units-of-production depreciation method and the vehicle was driven 35,000 miles during 2017, 25,000 miles during 2018 and 14,000 miles in 2019?

Answer 1

$7,000

Step-by-step explanation:

The computation of the depreciation expense for the year 2019 is shown below:

But before that first we have to determine the depreciation per miles which is

= (Original cost - residual value) ÷ (estimated driven)

= ($40,000 - $4,000) ÷ (72,000 miles)

= ($36,000) ÷ (72,000 miles)

= $0.5 per miles

Now for the 2019, it would be

= Expected miles driven in 2019 × depreciation per mile

= 14,000 miles × $0.5

= $7,000