Question

Units-of-activity Depreciation A truck acquired at a cost of $295,000 has an estimated residual value of $16,900, has an estimated useful life of 54,000 miles, and was driven 5,400 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 per mile (c) The units of activity depreciation for the year

Answer 1

Correct Answer:

Depreciable cost	$             2,78,100
Depreciable rate	5.15 Per unit
units of Activity Depreciation for the year	$                 27,810

Working:

A	Cost	$              2,95,000.00
B	Residual Value	$                 16,900.00
C=A - B	Depreciable base	$              2,78,100.00
D	Usage (in miles)	54000
E = C/D	Depreciation per mile	5.15

Depreciation Expense = Depreciable rate per unit * no. of miles during the year

= 5.15 * 5400 = $ 27,810

End of answer.

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