Question

Units-of-Production Depreciation Irons Delivery Inc. purchased a new delivery truck for $42,000 on January 1, 2019. The truck is expected to have a $2,000 residual value at the end of its 5-year useful life. Irons uses the units-of-production method of depreciation. Irons expects the truck to run for 150,000 miles. The actual miles driven in 2019 and 2020 were 40,000 and 36,000, respectively. Required: Prepare the journal entry to record depreciation expense for 2019 and 2020. Round your answers to the nearest dollar. Do not round intermediate calculations. 2019 Dec. 31 Depreciation Expense Accumulated Depreciation (Record units-of-production depreciation expense) 2020 Dec. 31 Depreciation Expense Accumulated Depreciation (Record units-of-production depreciation expense)

Answer 1

	Total cost of the truck	$42,000
	Less: Residual value	$2,000
	Balance depreciable value	$40,000
	Total capacity in miles	150,000
	Miles driven in 2019	40,000
	Miles driven in 2020	36,000
	Depreciation:	Amount	Accumulated depreciation
	Depreciation for 2019 ($40,000*40,000/150,000)	$10,666.67	$10,666.67
	Depreciation for 2020 ($40,000*36,000/150,000)	$9,600.00	$20,266.67
	Journal entries:
Date	Particulars	Debit	Credit
2019	Depreciation expenses	$10,666.67
	To Accumulated depreciation / Truck		$10,666.67
	(Depreciation recorded for 2019)
2020	Depreciation expenses	$9,600.00
	To Accumulated depreciation / Truck		$9,600.00
	(Depreciation recorded for 2020)