Question

A business bought a new truck for $40,000 for its auto parts delivery service. It estimated that the truck would last 200,000 miles with a salvage value of $8,000. What would be the depreciation expense for the first year assuming it is driven 11,500 miles in the first year?

Answer 1

The depreciation expense for the first year would be $1,840.

Step-by-step explanation:

To find the depreciation expense for the first year, we need to calculate the depreciation per mile and then multiply it by the number of miles driven in the first year. The depreciation per mile is calculated by subtracting the salvage value from the initial cost of the truck, and then dividing that by the estimated lifespan in miles. In this case, it would be:

Depreciation per mile = (Initial cost - Salvage value) / Estimated lifespan

Depreciation per mile = ($40,000 - $8,000) / 200,000 miles

Depreciation per mile = $32,000 / 200,000 miles

Depreciation per mile = $0.16 per mile

Now, we can calculate the depreciation expense for the first year by multiplying the depreciation per mile by the number of miles driven in the first year:

Depreciation expense for the first year = Depreciation per mile x Miles driven in first year

Depreciation expense for the first year = $0.16 per mile x 11,500 miles

Depreciation expense for the first year = $1,840