To calculate depreciation using the units-of-production method, we first find the depreciation rate per mile. Then, we use this rate to calculate the depreciation expense for 2023 and 2024 based on the miles driven.

Step 1: Calculate Depreciation Rate per Mile

1. Cost of Truck: $42,000
2. Residual Value: $2,000
3. Total Expected Mileage: 150,000 miles

Formula for Depreciation Rate per Mile:

$\text{Depreciation Rate per Mile} = \frac{\text{Cost - Residual Value}}{\text{Total Expected Mileage}}$

$= \frac{42,000 - 2,000}{150,000} = \frac{40,000}{150,000} = 0.2667 \, \text{per mile}$

Step 2: Calculate Depreciation Expense for Each Year

For 2023:

1. Miles Driven: 40,000 miles
2. Depreciation Expense:

$\text{Depreciation Expense} = \text{Miles Driven} \times \text{Depreciation Rate per Mile}$

$= 40,000 \times 0.2667 = 10,668$

For 2024:

1. Miles Driven: 36,000 miles
2. Depreciation Expense:

$\text{Depreciation Expense} = 36,000 \times 0.2667 = 9,601$

Step 3: Prepare Journal Entries

Using the calculated depreciation expenses, the journal entries for each year are as follows:

2023

Date: Dec. 31, 2023
Account Debit: Depreciation Expense - $10,668
Account Credit: Accumulated Depreciation - $10,668

Journal Entry:

Date	Account	Debit	Credit
Dec. 31, 2023	Depreciation Expense	10,668
	Accumulated Depreciation		10,668

2024

Date: Dec. 31, 2024
Account Debit: Depreciation Expense - $9,601
Account Credit: Accumulated Depreciation - $9,601

Journal Entry:

Date	Account	Debit	Credit
Dec. 31, 2024	Depreciation Expense	9,601
	Accumulated Depreciation		9,601

Summary

• Depreciation Expense for 2023: $10,668
• Depreciation Expense for 2024: $9,601

Would you like more details on these calculations?

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1. How would depreciation change if mileage expectations varied year to year?
2. How does the units-of-production method differ from straight-line depreciation?
3. What is the impact on the balance sheet after recording depreciation?
4. What happens if the residual value changes during the truck’s useful life?
5. How does the units-of-production method match with actual usage patterns?

Tip: The units-of-production depreciation method aligns depreciation expense with actual usage, ideal for assets where wear and tear is mileage- or usage-dependent.