On January 1, Year 1, Friedman Company purchased a truck that cost $29,000. The truck had an expected useful life of 200,000 miles over 8 years and an $7,000 salvage value. During Year 2, Friedman drove the truck 37,000 miles. The amount of depreciation expense recognized in Year 2 assuming that Friedman uses the units-of-production method is: (Do not round intermediate calculations.)

Question

Business

Rhianna Burton

3 April, 11:51

On January 1, Year 1, Friedman Company purchased a truck that cost $29,000. The truck had an expected useful life of 200,000 miles over 8 years and an $7,000 salvage value. During Year 2, Friedman drove the truck 37,000 miles. The amount of depreciation expense recognized in Year 2 assuming that Friedman uses the units-of-production method is: (Do not round intermediate calculations.)

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Kyan Townsend · Answer 1

The depreciation expense for the Year 2 amounts to $4,070

Explanation:

The method of unit of production is the depreciation method which computes the value of the asset over time.

The depreciation expense for the Year 2 is computed using the method of units of production as:

Depreciation expense = [ (Truck cost - Salvage value) / Estimated miles] * Miles driven during year

where

Miles driven during year is 37,000

Truck cost is $29,000

Salvage value is $7,000

Estimated miles is 200,000 miles

So, putting the values above:

Depreciation expense = [ ($29,000 - $7,000) / 200,000] * 37,000

Depreciation expense = [$22,000 / 200,000] * 37,000

Depreciation expense = $0.11 * 37,000

Depreciation expense = $4,070