The Rockland Transport Company has many trucks that have an estimated useful life of 200,000 miles. The company computes depreciation on a mileage basis. Suppose Rockland purchases a new truck for $100,000 cash. Its expected residual value is $10,000. Its mileage during year 1 is 60,000 and during year 2 is 90,000.
1. What is the depreciation expense for each of the 2 years?
2. Compute the gain or loss if Rockland sells the truck for $40,000 at the end of year 2.