Question

Sandhill Company purchased a delivery truck for $48,000 on July 1, 2022. The truck has an expected salvage value of $4,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2022 and 12,000 in 2023. Sandhill uses the straight-line method of depreciation. Compute depreciation expense for 2022 and 2023.

Answer 1

Answer:

Depreciation expense for 2022 was $2,750

Depreciation expense for 2023 was $5,500

Explanation:

Sandhill Company uses straight-line depreciation method, Depreciation Expense each year is calculated by following formula:

Annual Depreciation Expense = (Cost of delivery truck − Salvage Value )/Useful Life = ($48,000-$4,000)/8 = $5,500

In 2022, the delivery truck was used from July 1 to December 31 (6 months)

Depreciation Expense for 2022 = ($5,500 /12) x 6 = $2,750

Depreciation Expense for 2023 = $5,500