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10 April, 03:16

On January 1, 2016, Wasson Company purchased a delivery vehicle costing $50,710. The vehicle has an estimated 8-year life and a $4,700 residual value. Wasson uses the units-of-production depreciation method and Wasson estimates that the vehicle will be driven 107,000 miles. What is the vehicle's book value as of December 31, 2017 assuming Wasson uses the units-of-production depreciation method and the vehicle was driven 10,700 miles during 2016 and 18,700 miles during 2017? (Do not round your intermediate calculations.)

A. $34,508.

B. $38,068.

C. $33,368.

D. $39,208.

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  1. 10 April, 06:41
    0
    Book value = $33,008

    Explanation:

    Giving the following information:

    On January 1, 2016:

    Purchase cost = $50,710.

    Residual value = $4,700

    Wasson uses the units-of-production depreciation method.

    The vehicle will be driven 107,000 miles.

    2016 = 10,700 miles

    2017 = 18,700

    First, we need to calculate the depreciation of 2016 and 2017, using the following formula:

    Annual depreciation = [ (original cost - salvage value) / useful life of miles]*miles

    2016 = [ (50,710 - 4,700) / 107,000]*10,700 = $4,601

    207 = 0.43*18,700 = $8,401

    Book value = depreciable value - accumulated depreciation

    Book value = 46,010 - (4,601 + 8,401) = $33,008
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