Last year's asset turnover ratio was 2.0. Sales have increased by 25% and total assets have increased by 10% since that time. Wh
1 answer:
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Answer:
option (A) $11,000
Explanation:
Given;
Miles drove in first year = 15,000
Miles drove in second year = 22,000
Cost of the truck = $175,000
Residual value = $25,000
Estimated life = 10 years or 300,000 miles
Now,
using the activity based method
Rate of depreciation per mile driven =
or
Rate of depreciation per mile driven =
or
= $0.5 per mile
also,
Number of miles driven in second year = 22,000 miles
Hence,
Depreciation for the second year
= Depreciation rate × Number of miles driven in second year
= 0.5 × 22,000
= $11,000
Hence,
The correct answer is option (A) $11,000