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21 December, 15:09

Tasty Subs acquired a delivery truck on October 1, 2021, for $18,500. The company estimates a residual value of $1,700 and a six-year service life. It expects to drive the truck 140,000 miles. Actual mileage was 4,400 miles in 2021 and 17,800 miles in 2022. Required: Calculate depreciation expense using the activity-based method for 2021 and 2022, assuming a December 31 year-end. (Do not round your intermediate calculations.)

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  1. 21 December, 15:18
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    2021 Depreciation expense is $528

    2022 Depreciation expense is $2,136

    Explanation:

    Depreciation is the systematic allocation of the cost of an asset to the income statement over the estimated useful life of that asset.

    It is determined as the depreciable value of the asset over the estimated useful life of the asset where the depreciable value is the difference between the cost and salvage value of the asset.

    Depreciable value = $18,500 - $1,700

    = $16,800

    Depreciation expense using the activity-based method for

    2021

    = 4,400/140,000 * $16,800

    = $528

    2022

    = 17,800/140,000 * $16,800

    = $2,136
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