Question

Units-of-activity Depreciation A truck acquired at a cost of $215,000 has an estimated residual value of $13,400, has an estimated useful life of 48,000 miles, and was driven 3,800 miles during the year. Determine the following. If required, round your answer for the depreciation rate to two decimal places. (a) The depreciable cost $ (b) The depreciation rate $ per mile (c) The units-of-activity depreciation for the year $

Answer 1

a. Depreciable cost = $201600

b. Depreciation rate per mile = $4.2

c. Depreciation for the year = $15960

Step-by-step explanation:

a.

The depreciable cost is the cost that qualifies for depreciation and on which depreciation on the asset will be charged.

Depreciable cost = Cost - Salvage Value

The depreciable cost is = 215000 - 13400 = $201600

b.

Th depreciable rate per mile is = Depreciable cost / useful life in miles

Thus, Depreciation rate per unit = 201600 / 48000 = $4.2 / mile

c.

Based on 3800 miles driven this year,

The depreciation for the year = 4.2 * 3800 = $15960