Patterson Company has the following information of one of its vehicles purchased on January 1, 1992:
Vehicle cost $50,000 -
Useful life, years, estimated 5 -
Useful life, miles, estimated 100,000
Salvage value, estimated $10,000
Actual miles driven:
1992 30,000
1993 20,000
1994 15,000
1995 25,000
1996 12,000
No estimates were changed during the life of the asset. The 1996 depreciation expense using the units-of-production method was ________.
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A. B. C. D. E.B
Under the units-of-production method, periodic depreciation is based on the proportion of expected total production that occurred. For the years 1992 to 1995, the total accumulated depreciation was $36,000 (($50,000-10,000) X (30,000 + 20,000 + 15,000 + 25,000) / 100,000(. Therefore, the remaining depreciation for the last year, 1996, is only $4,000 ($40,000-36,000). Given that the 12,000 miles driven in 1996 exceeded the remaining estimated production of 10,000 miles, only
$4,000 can be taken as depreciation in 1996.