Chichi\'s Pizza purchased a delivery van on January 1, 2003 for $50,000. In addi

Question

Chichi's Pizza purchased a delivery van on January 1, 2003 for $50,000. In addition, Chichi had to pay sales tax and title fees of 2,000. The van is expected to have a five-year useful life and a salvage value of $12,000. Also, the van is expected to drive 200,000 miles during its useful life. The van drove 33,000 miles in the first year and 46,000 in the second year (that's a lot of pizza). Using Units-of-Production depreciation, the accumulated depreciation at the end of the second year would be:

a). 9,200

b). 15,800

c). 15,010

d). 8740

Explanation / Answer

Cost 50000 Taxes 2000 Total Cost 52000 Depreciation (Cost- Salvage) *No of miles drove/ Expected Miles First Year (52000-12000)*33000/200000 6600 Second year (52000-12000)*46000/200000 9200 Accumulated Depreciation = $ 6600+9200 $15,800 The correct option is b) $ 15800

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