Answer:
Annual depreciation= $7,200
Explanation:
Giving the following information:
A company purchased a van for $42,000 and expects it can be sold for $6,000 after 120,000 miles of service.
To calculate the annual depreciation, we need to use the following formula:
Annual depreciation= [(original cost - salvage value)/useful life of production in miles]*miles driven
For 24,000 miles:
Annual depreciation= [(42,000 - 6,000) / 120,000]*24,000
Annual depreciation= 0.3*24,000
Annual depreciation= $7,200
