Question

To meet increased sales, a large grainery is planning to purchase 2 new dump trucks. Each dump truck will cost $45,000. The salvage value for each truck is $5,000. Total miles over the truck’s useful life is 160,000. Using the units-of-production method, how much is the depreciation for each truck in year 1 when the trucks were driven 14,000 miles?

Answer 1

• All working forms part of the answer

A	Cost of truck	$                                   45,000.00
B	Salvage Value	$                                     5,000.00
C = A - B	Depreciable base	$                                   40,000.00
D	Expected miles to run	160,000
E = C/D	Depreciation per mile run	$                                              0.25
F	Miles driven in Year 1	$                                   14,000.00
G = E x F	Depreciation expense for 2 trucks	$                                     3,500.00
H = G / 2 trucks	Depreciation expense for each truck	$                                     1,750.00 = Answer

Answer: Depreciation for each truck in Year 1 = $ 1,750