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 company uses the units-of-production method. The amount of depreciation expense recognized in Year 2 is:

Answer 1

Answer:

the depreciation rate is $7,400

Explanation:

The computation of the depreciation expense for the year 2 is shown below:

But before that the depreciation rate would be

= (Purchase cost - salvage value) ÷ (estimated miles)

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

= $0.40

Now the depreciation expense is

= Truck drove × depreciation rate

= 18,500 × $0.40

= $7,400

hence, the depreciation rate is $7,400