Question

# Iverson Company purchased a delivery truck for \$45,000 on January 1, 2020. The truck was assigned...

Iverson Company purchased a delivery truck for \$45,000 on January 1, 2020. The truck was assigned an estimated useful life of 100,000 miles and has a residual value of \$10,000. The truck was driven 18,000 miles in 2020 and 22,000 miles in 2021. Compute depreciation expense using the units-of-activity method for the years 2020 and 2021.

Depreciation expense for 2020 \$

Depreciation expense for 2021 \$

Annual Depreciation Expenses for 2020 = \$6,300

Annual Depreciation Expenses for 2021 = \$7,700

Explanation -

Annual Depreciation Expenses = (Cost of truck – Residual Value) / Estimated Total Miles * Actual Miles

Annual Depreciation Expenses for 2020 = {(\$45000 - \$10000) / 100000} * 18000

Annual Depreciation Expenses for 2020 = \$6,300

Annual Depreciation Expenses for 2021 = {(\$45000 - \$10000) / 100000} * 22000

Annual Depreciation Expenses for 2021 = \$7,700

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