A company acquired a delivery truck on October 1, Year 1, for $26,000. The company estimates a residual value of $2,000 and a six-year service life. It expects to drive the truck 120,000 miles. Actual mileage was 5,900 miles in Year 1 and 20,800 miles in Year 2. Required: Calculate depreciation expense using the activity-based method for Year 1 and Year 2, assuming a December 31 year-end. (Do not round your intermediate calculations.)

Question

Business

Tony Boone

4 October, 20:17

A company acquired a delivery truck on October 1, Year 1, for $26,000. The company estimates a residual value of $2,000 and a six-year service life. It expects to drive the truck 120,000 miles. Actual mileage was 5,900 miles in Year 1 and 20,800 miles in Year 2. Required: Calculate depreciation expense using the activity-based method for Year 1 and Year 2, assuming a December 31 year-end. (Do not round your intermediate calculations.)

+4

Answers (1)

Know the Answer?

Terry Kemp · Answer 1

Depreciation Year 1 = $1,180

Depreciation Year 2 = $4,160

Explanation:

The computation of depreciation expense activity-based method using is shown below:-

Depreciation expense = (Cost - Salvage value) : Total expected mileage to be used * Actual mileage used

By using above formula we can calculate the Depreciation Year 1 and Depreciation Year 2 which is shown below:-

Depreciation Year 1 = ($26,000 - $2,000) : $120,000 * $5,900

= $24,000 : $120,000 * $5,900

= $1,180

Depreciation Year 2 = ($26,000 - $2,000) : $120,000 * $20,800

= $24,000 : $120,000 * $20,800

= $4,160