Question
Grafton Company purchased a new car for use in its business on January 1, 2017. It...
Grafton Company purchased a new car for use in its business on January 1, 2017. It paid $ 29,000 for the car. Grafton expects the car to have a useful life of four years with an estimated residual value of zero. Grafton expects to drive the car 40,000 miles during 2017, 75,000 miles during 2018, 90,000 miles in 2019, and 85,000 miles in 2020, for total expected miles of 290,000.
Using the units-of-production method of depreciation (with miles as the production unit), calculate the following amounts for the car for each of the four years of its expected life (do not round here; use three decimal places for the depreciation cost per mile)
|
a. |
Depreciation expense |
|
b. |
Accumulated depreciation balance |
|
c. |
Book value |
Homework Answers
Answer #1
Units of Production Depreciation Method:
Cost of Machine = $29,000
Salvage Value = $0
Useful Life = 290,000 miles
Depreciable Cost = Cost of Machine - Salvage Value
Depreciable Cost = $29,000 - $0
Depreciable Cost = $29,000
Depreciation per mile = Depreciable Cost / Useful Life
Depreciation per mile = $29,000 / 290,000
Depreciation per mile = $0.100
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