Question

Teal Corporation purchased a truck at the beginning of 2017 for $54,500. The truck is estimated to have a salvage value of $2,180 and a useful life of 174,400 miles. It was driven 25,070 miles in 2017 and 33,790 miles in 2018. Compute depreciation expense for 2017 and 2018. eful Depreciation expense for 2017 Depreciation expense for 2018

Answer 1

Answer 1 :

Depreciation expense for 2017 = [(Purchase cost - Salvage value) / Estimated useful life in miles] * Miles in 2017

= [($54,500 - $2,180) / 174,400 miles] * 25,070 miles

= $7,521.

Depreciation expense for 2018 = [(Purchase cost - Salvage value) / Estimated useful life in miles] * Miles in 2018

= [($54,500 - $2,180) / 174,400 miles] * 33,790 miles

= $10,137.

Answer 2:

Depreciation expense for 2017 using straight line method= [(Purchase cost - Salvage value) / Estimated useful life]

= [(87,200 - $8,720) / 8 years] = $9,810.

Depreciation expense for 2017 using straight line method = $9,810 * (4 months / 12 months)

= $3,270.