Question

Sunland Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 145,000 miles. Taxi 10 cost $29,500 and is expected to have a salvage value of $500. Taxi 10 was driven 32,000 miles in 2021 and 30,100 miles in 2022.

Answer 1

see below

Step-by-step explanation:

Under the unit of depreciation method, depreciation expense is per unit used.

The calculation of depreciation expense per unit is as per the formula.

DE per unit (Asset Cost − Salvage Value)​/ Estimated Production Output

For Tax 10:

=($29,500- $500 ) /145,000 miles

= $29,000/145,000

=$0.2

The depreciation expense is $0.2 per mile.

Depreciation for 2021 will be depreciation per mile multiplied by miles driven.

=32,000 x $0.2

=$6,400

Depreciation for 2022

=30100 x $0.2

=$6,020