PE 10-3B Units-of-production depreciation

A truck acquired at a cost of $150,000 has an estimated residual value of $40,000, has an estimated useful life of 400,000 miles, and was driven 80,000 miles during the year. Determine (a) the depreciable cost, (b) the depreciation rate, and (c) the units-of-production depreciation for the year.

Answer:
a. $110,000 ($150,000 – $40,000)
b. $0.275 per mile ($110,000/400,000 miles)
c. $22,000 (80,000 miles × $0.275) 

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