Question

Trusty Trucking Corporation uses the units-of-production depreciation method because units-of-production best measures wear and tear on the trucks. Consider these facts about one Mack truck in the company's fleet (Click on the icon to view the facts.) i More Info - X Read the requirements Date Accounts and Explanation Debit Credit Mar. 15 13,020 Depreciation Expense-Truck Accumulated Depreciation-Truck 13,020 When acquired in 2015, the rig cost $450,000 and was expected to remain in service for 10 years or 1,000,000 miles. Estimated residual value was $140,000 The truck was driven 75,000 miles in 2015, 115,000 miles in 2016, and 155,000 miles in 2017. After 42,000 miles, on March 15, 2018, the company traded in the Mack truck for a less expensive Freightliner. Trusty also paid cash of $21,000. Fair market value of the Mack truck was equal to its net book value on the date of the trade. To record depreciation on truck. Requirement 2. Determine Trusty's cost of the new truck. Print Done The cost of the new truck is $ Enter any number in the edit fields and then click Check Answer. 1 part 1 remaining Clear All Check Answer 1:14 PM Type here to search A 4 11/27/2019

Answer 1

	Cost of New Truck	=	$                   3,51,030
	Workings:
	Depreciation rate per unit	=	(Cost - Residual value) / useful Value in units
		=	($450000 - $140000) / 1000000
		=	$                           0.31
Year	Units				Depreciation expense
2015	75000	X	$                           0.31	=	$                             23,250
2016	115000	X	$                           0.31	=	$                             35,650
2017	155000	X	$                           0.31	=	$                             48,050
2018	42000	X	$                           0.31	=	$                             13,020
Total Accumulated Depreciation				=	$                         1,19,970
	Cost of Old Truck			=	$                         4,50,000
Less:	Accumulated Depreciation			=	$                         1,19,970
	Book Value of Old Truck			=	$                         3,30,030
Add:	Cash Paid			=	$                             21,000
	Cost of New Truck				$                         3,51,030