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Units-of-activity Depreciation A truck acquired at a cost of $530,000 has an estimated residual value of...

Units-of-activity Depreciation A truck acquired at a cost of $530,000 has an estimated residual value of $28,800, has an estimated useful life of 56,000 miles, and was driven 3,900 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 $

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Homework Answers

Answer #1

Cost = $530,000
Residual Value = $28,800
Estimated Useful Life = 56,000 miles

Answer a.

Depreciable Cost = Cost - Residual Value
Depreciable Cost = $530,000 - $28,800
Depreciable Cost = $501,200

Answer b.

Depreciation Rate = Depreciable Cost / Estimated Useful Life
Depreciation Rate = $501,200 / 56,000
Depreciation Rate = $8.95 per mile

Answer c.

Depreciation for the year = Depreciation Rate * Number of miles driven
Depreciation for the year = $8.95 * 3,900
Depreciation for the year = $34,905

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