3B Window Washers Inc purchased a new truck at the beginning

3B Window Washers, Inc. purchased a new truck at the beginning of the year at a cost of $12,000. The estimated residual value was $2,000. Assume that the estimated useful life was five years, and the estimated productive life of the truck was 50,000 miles. Required: 1. Calculate the Depreciable Cost of the truck.

2. Calculate the Straight-Line Depreciation Expense per year for the truck.

3. Calculate the Units-of-production Depreciation Expense per unit (that is, per mile) for the truck.

4. If 3B estimates that it will use the truck for 8,000 miles in Year 3, how much total depreciation expense would be recorded in Year 3 using the units-of-production depreciation method?

Solution

1.Depreciable cost of the truck

Depreciable cost = Cost of truck - Salvage value

=$12,000-$2,000=$10,000

2.Stright line Depreciation Expenses=

Depreciable cost / Useful life of truck

=10,000/5=$2,000/ year

3.Units of production Depreciation expenses per Miles

=Depreciable cost /Total life in Mies

=10,000/50,000

=$.2 per Miles

4.Depreciation for Year 3

=Depreciable cost * Miles in Year 3 / Total Miles

=10,000*8000/50,000

=$1600