Question

In 2018, Close Co. purchased a bus for 521837. The company expects the bus to last...

In 2018, Close Co. purchased a bus for 521837. The company expects the bus to last for 14 years and should travel about 327755 kilometres (kms). It is expected that the bus will be sold at an auction for $30,000 in the end. During 2018 the bus was used for 30,000 kms.

Calculate the depreciation expense for the machine 2018 using the unit of production method.

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Answer #1

Purchase price of bus = $521,837

Salvage Value = $30,000

Total Travel over useful life = 327,755 kms

Travel in 2018 = 30,000 kms

Depreciaiton expense using unit of production method is as follows

Depreciation expense for the machine 2018 = (Purchase Price - Salvage Value) * Travel in 2018 / Total Travel over useful life

= ($521,837 - $30,000) * 30,000 kms / 327,755 kms

= $45,018.71825

Therefore, depreication expense for the machine 2018 using unit of production method is $45,018.72

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