Question

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		$

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Answer 1

Ans.	*Calculations for depreciation per unit :
	Depreciation per unit =   (Cost of asset - Residual value) / Expected activity
	($45,000 - $10,000) / 100,000
	$35,000 / 100,000
	$0.35	per unit
	*Calculations for depreciation expenses :
	Particualars	Depreciation per unit (a)	Actual activity (b)	Depreciation (a*b)
	Depreciation expense for 2020	$0.35	18000	$6,300
	Depreciation expense for 2021	$0.35	22000	$7,700