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12 October, 15:16

Grover Corporation purchased a truck at the beginning of 2017 for $109,200. The truck is estimated to have a salvage value of $4,200 and a useful life of 120,000 miles. It was driven 21,000 miles in 2017 and 29,000 miles in 2018. What is the depreciation expense for 2018? a. $27,405b. $7,000c. $25,375d. $43,750

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  1. 12 October, 16:11
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    The depreciation expense for 2018: c. $25,375

    Explanation:

    Grover Corporation uses the units-of-production depreciation method. Depreciation expense is calculated by the following formula:

    Depreciation Expense = [ (Cost of asset - Salvage Value) / Life in Number of Units

    ] x Number of Units Produced = Depreciation Expense per unit x Number of Units Produced

    In the company,

    Depreciation Expense per mile = ($109,200-$4,200) / 120,000 = $0.875

    The truck was driven 29,000 miles in 2018, so the depreciation expense for 2018: $0.875 x 29,000 = $25,375
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Home » Business » Grover Corporation purchased a truck at the beginning of 2017 for $109,200. The truck is estimated to have a salvage value of $4,200 and a useful life of 120,000 miles. It was driven 21,000 miles in 2017 and 29,000 miles in 2018.
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