A delivery truck was purchased for $60,000 and is expected to be used for 5 years and 100,000 miles. The truck's residual value is $10,000. By the end of the first year, the truck has been driven 16,000 miles. What is the depreciation expense in the first year using activity-based depreciation?

Question

Harold Brennan

Mathematics

1 April, 02:53

A delivery truck was purchased for $60,000 and is expected to be used for 5 years and 100,000 miles. The truck's residual value is $10,000. By the end of the first year, the truck has been driven 16,000 miles. What is the depreciation expense in the first year using activity-based depreciation?

+4

Answers (1)

Know the Answer?

Ansley Weaver · Answer 1

Step-by-step explanation:

Cost of Truck = $60,000

Expected use = 100,000 miles

Residual value = $10,000

Depreciation per mile = (Cost of Truck - Residual value) / Estimated use

= (60,000-10,000) / 100,000

= 50,000/100,000

= $0.5

Miles driven in first year = 16,000

Depreciation expense for first year = Miles driven in first year x Depreciation per mile

= 16,000 x 0.5

= $8,000