Question

On January 2, 2018, Reliable Delivery Service purchased a truck at a cost of $65,000. Before placing the truck in service, Reliable spent $2,200 painting it, $1,700 replacing tires, and $10,600 overhauling the engine. The truck should remain in service for five years and have a residual value of $6,000. The truck's annual mileage is expected to be 23,000 miles in each of the first four years and 13,000 miles in the fifth year—105,000 miles in total. In deciding which depreciation method to use, Harold Parker, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance). Read the requirements. Before completing the units-of-production depreciation schedule, calculate the depreciation expense per unit. Select the formula, then enter the amounts and calculate the depreciation expense per unit. (Round depreciation expense per unit to two decimal places.) = Depreciation per unit 17

Answer 1

Ans.	Depreciation per Unit =			(Cost - Salvage Value)/ Total units of production
	=			({$65,000 + $2,200 + $1,700 + $ 10,600} - $6,000)/105,000
	=			($79,500 - $6,000)/105,000
	=			$73,500/105,000
	=			$       0.70