Calculating Units-of-Production Depreciation Swift Trucking Company purchased a

Question

Calculating Units-of-Production Depreciation
Swift Trucking Company purchased a long-haul tractor-trailer for $400,000 at the beginning of the year. The expected useful life of the tractor-trailer rig was 8 years or 500,000 miles.

Salvage value was estimated to be $40,000. During the first 5 years of use, the rig logged the following usage in miles:

Calculate the depreciation expense to be taken on the tractor-trailer for each year using:

(a) Units-of-production method

Round your answer to the nearest whole number.

(b) Straight-line method

Round your answer to the nearest whole number.

Which method gives you higher total depreciation charges over the five-year period?

AnswerStraight-line methodUnits-of-production method

Year 1 80,000 miles Year 2 75,000 miles Year 3 80,000 miles Year 4 76,000 miles Year 5 60,000 miles Total 371,000 miles

Explanation / Answer

Answer A. Calculation of Dep Under Units of Production Method Year Usage in Miles Depreciation A (A/500000) X $360000 1 80000 57600 2 75000 54000 3 80000 57600 4 76000 54720 5 60000 43200 Total Dep. 267120 Answer B Depreciation Charged Under Straight Line Method Year Usage in Miles Depreciation A ($400000 - $40000) / 8 Year 1 80000 45000 2 75000 45000 3 80000 45000 4 76000 45000 5 60000 45000 Total Dep. 225000 Answer - method gives higher total depreciation charges over the five year is Depreciation charged under unit of production method

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