Question

Interline trucking purchased a tractor trailer for $84,000. interline uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. salvage value is estimated to be $12,000. if the truck is driven 80,000 miles in its first year, how much depreciation expense should interline record?

Answer 1

$5,760

Step-by-step explanation:

depreciable value = cost - salvage value = $84,000 - $12,000 = $72,000

units of activity = 1,000,000 miles

depreciation expense per unit of activity = $72,000 / 1,000,000 miles = $0.072 per mile

since the company used the tractor trailer during 80,000 miles during the first year, the depreciation expense should be = 80,000 miles x $0.072 per mile = $5,760

The journal entry to record the depreciation expense should be

December 31, year 1, depreciation expense of tractor trailer:

Dr Depreciation expense 5,760

Cr Accumulated depreciation - tractor trailer 5,760