Question

During the current year, Central Auto Rentals purchased 60 new automobiles at a cost of $14,000 per car. The cars will be sold to a wholesaler at an estimated $6,000 each as soon as they have been driven 50,000 miles. Central Auto Rentals computes depreciation expense on its automobiles by the units-of-output method, based on mileage. a. Compute the amount of depreciation to be recognized for each mile that a rental automobile is driven. b. Assuming that the 60 rental cars are driven a total of 1,870,000 miles during the current year, compute the total amount of depreciation expense that Central Auto Rentals should recognize on this fleet of cars for the year.

Answer 1

Cost NO per of Total Cars Cost a $14ooo be lhooo xbo $8 yeone Tatal Sulu age Value Gox Gooo $36 gooo Life of Curs 50,000 miles ca) Depreciation for each mile Cost- Salvie Value Life 849,000 - 360,000 50,ooo $9.6.7 mile (1) Total running 1,87,000 miles - Running for each 1,870, ooolbo 31,166.67 mile cur current year Dep. 31, 1 66-67 x 9.60 $299, 200