Question

"Your company is planning on buying a truck for $80,000. It is expected to run for 75,000 miles resulting in a salvage value of $5,000.What is the depreciation per mile and how much is the book value at 30,000 miles?"

Answer 1

1. Depreciation per mile is $1

2.The book value of the truck at 30,000 miles is $50,000

Step-by-step explanation:

Depreciation per mile = (Cost of truck - Salvage value)/Life in Number of miles

The truck has cost of $80,000 and salvage value of $5,000. It is also expected to run for 75,000 miles.

Therefore,

Depreciation per mile = ($80,000 - $5,000)/75,000 = $75,000/75,000 = $1

Accumulated Depreciation at 30,000 miles = 30,000 x $1 = $30,000

The book value of the truck = Cost of the truck - Accumulated Depreciation

At 30,000 miles,

The book value of the truck = $80,000 - $30,000 = $50,000