Chapter 11: Q1BE (page 583)

Fernandez Corporation purchased a truck at the beginning of 2017 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2017 and 31,000 miles in 2018. Compute depreciation expense for 2017 and 2018.

Short Answer

Expert verified

Depreciation for 2017 = $6,900

Depreciation for 2018 = $9,300

Step by step solution

Step-by-Step SolutionStep 1: Meaning of Depreciation

Depreciation is an annual expense that is charged on an asset whose value is reduced due to weathering and depletion. The land is the only asset whose value increases with the passage of time and no depreciation should be charged for it.

Computing depreciation expense

Depreciation expense for 2017

$Depreciation expense = \frac{Cost of asset - Salvage value}{Useful life} \times Total miles cover = \frac{$ 50, 000 - $ 2, 000}{160, 000} \times 23, 000 = \frac{$ 48, 000}{160, 000} \times 23, 000 = $ 6, 900$

Depreciation expense for 2018

$Depreciation expense = \frac{Cost of asset - Salvage value}{Useful life} \times Total miles cover = \frac{$ 50, 000 - $ 2, 000}{160, 000} \times 31, 000 = \frac{$ 48, 000}{160, 000} \times 31, 000 = $ 9, 300$

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Asset	Cost	Salvage	Estimated useful life
A	\(70,000	\)7,000	10 years
B	50,000	5,000	5 years
C	82,000	4,000	12 years

Fernandez Corporation purchased a truck at the beginning of 2017 for \(50,000. The truck is estimated to have a salvage value of \)2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2017 and 31,000 miles in 2018. Compute depreciation expense for 2017 and 2018.

Short Answer

Step by step solution

Step-by-Step SolutionStep 1: Meaning of Depreciation

Computing depreciation expense

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