Question

Units-of-activity Depreciation A truck acquired at a cost of $610,000 has an estimated residual value of $36,700, has an estimated useful life of 63,000 miles, and was driven 5,700 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 (c) The Units-of-activity Depreciation for the Year per mile

Answer 1

Answers

• [1] Unit of activity

A	Cost	$          610,000.00
B	Residual Value	$            36,700.00
C=A - B	Depreciable base	$          573,300.00
D	Usage	63,000
E = C/D	Depreciation per …..	$                    9.100

[a] Depreciable cost = $ 573300

[b] Depreciation rate = $ 9.10 per mile

[c] Unit of activity depreciation for the year = 5700 miles x $ 9.1= $ 51,870

• [2] Doble declining balance

A	Cost	$            62,800.00
B	Residual Value	$              5,000.00
C=A - B	Depreciable base	$            57,800.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$            14,450.00
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

[a] DDB rate = 50%

[b] DDB depreciation for first year = $ 62800 x 50% = $ 31,400