Question

Rosco Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 150,000 miles. Taxi no. 10 cost $39,500 and is expected to have a salvage value of $500. Taxi no. 10 is driven 30,000 miles in year 1 and 20,000 miles in year 2. Collapse question part (a1) Calculate depreciation cost per mile using unit-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.) Depreciation cost

Answer 1

Depreciation expense,

In year 1 = $7,800

In year 2 = $4,000

Step-by-step explanation:

unit-of-activity depreciation method = (miles driven in a year / total expected miles of the car) x (Cost of asset - Salvage value)

Depreciation in year 1 = (30,000 / 150,000) x ($39,500 - $500) = $7,800

Depreciation expense in year 2 = (20,000 / 150,000) x ($39,500 - $500) = $4,000

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