Grimwood Trucking purchased a tractor trailer for $171,500. Interline uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $24,500. If the truck is driven 90,000 miles in its first year, how much depreciation expense should Grimwood record?

Question

Glenn Key

Business

11 November, 02:57

Grimwood Trucking purchased a tractor trailer for $171,500. Interline uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $24,500. If the truck is driven 90,000 miles in its first year, how much depreciation expense should Grimwood record?

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Answers (1)

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Kingston Mosley · Answer 1

Depreciation expense that Grimwood should record is $13,230.

Explanation:

units of activity method:

depreciation rate = (cost - salvage value) / estimated lifetime miles

= ($171500 - $24500) / (1000000 miles)

= $0.147 per mile

depreciation expense = $0.147 per mile*90000 miles

= $13,230

Therefore, Depreciation expense that Grimwood should record is $13,230.