Asked by Khurram Khalid on May 29, 2024
Verified
On June 15, 2010, Jumper Corporation purchased a truck for $50, 000 with an estimated useful life of six years and a residual value of $8, 000.The company uses units-of-production depreciation and estimates the truck will last 300, 000 miles.The truck was driven 20, 000 miles in 2010 and 60, 000 miles in 2011.The accumulated depreciation balance on December 31, 2011, after the adjusting entries have been posted should be
A) $ 8, 400
B) $10, 000
C) $11, 200
D) $13, 333
Units-Of-Production Depreciation
A depreciation method that allocates the cost of an asset over its useful life based on units produced rather than time, reflecting actual wear and tear.
Accumulated Depreciation
The total amount of depreciation expense allocated to a fixed asset since it was in service, reducing its book value on the balance sheet.
Service Life
The estimated duration of time that an asset is expected to be usable for its intended purpose.
- Recognize and juxtapose various formulas for depreciation.
- Acquire knowledge about the residual value concept and its importance for depreciation calculation.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
C
Explanation :
First, we need to calculate the depreciation rate per mile:
Depreciation rate = (cost of asset - residual value) / total estimated miles
Depreciation rate = ($50,000 - $8,000) / 300,000 = $0.14 per mile
Then, we can calculate the depreciation expense for each year:
2010 depreciation expense = 20,000 miles x $0.14 per mile = $2,800
2011 depreciation expense = 60,000 miles x $0.14 per mile = $8,400
The accumulated depreciation balance on December 31, 2011 would be the sum of the two years' depreciation expenses, which is:
Accumulated depreciation = $2,800 + $8,400 = $11,200
Therefore, the correct answer is choice C, $11,200.
Depreciation rate = (cost of asset - residual value) / total estimated miles
Depreciation rate = ($50,000 - $8,000) / 300,000 = $0.14 per mile
Then, we can calculate the depreciation expense for each year:
2010 depreciation expense = 20,000 miles x $0.14 per mile = $2,800
2011 depreciation expense = 60,000 miles x $0.14 per mile = $8,400
The accumulated depreciation balance on December 31, 2011 would be the sum of the two years' depreciation expenses, which is:
Accumulated depreciation = $2,800 + $8,400 = $11,200
Therefore, the correct answer is choice C, $11,200.
Learning Objectives
- Recognize and juxtapose various formulas for depreciation.
- Acquire knowledge about the residual value concept and its importance for depreciation calculation.