Question

A truck costs $320,000 and is expected to be driven 116,000 miles during its five-year life. Residual value is expected to be zero. If the truck is driven 29,000 miles during the first year, how much depreciation should the business record under the units-of-production method? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

a.$98,600

b.$80,040

c.$26,680

d.$51,040

Answer 1

Option B, $80,040 ( Nearest dollar )

Solution:

Given ,

Truck costs $320,000

Expected to be driven 116,000 miles

Truck is driven 29,000 miles

To calculate depreciation should the business record under the units-of-production method ,

Depreciation per mile = $320,000 / $116,000

                                    = $2.75

Depreciation for the first year = $2.75 x 29,000

                                                  = $79,750 ( Nearest dollar is the answer )