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Crazy boy [7]
3 years ago
6

Tasty Subs acquired a delivery truck on October 1, 2021, for $21,500. The company estimates a residual value of $2,500 and a six

-year service life. It expects to drive the truck 100,000 miles. Actual mileage was 5,000 miles in 2021 and 19,000 miles in 2022.
Required:
Calculate depreciation expense using the activity-based method for 2018 and 2019, assuming a December 31 year-end.
Business
1 answer:
Oksanka [162]3 years ago
7 0

Answer:

The depreciation expenses will be "950 and 3610". A further explanation is given below.

Explanation:

The given values are:

Cost,

= $21,500

Salvage value,

= $2,500

Asset's total life,

= $100,000

Now,

The Depreciation rate will be:

= \frac{ (Cost - Salvage \ value) }{Asset's \ total \ life}

On putting the values, we get

= \frac{ (21500 - 2500) }{100000}

= \frac{19000}{100000}

= 0.19

So,

For the year 2021, the depreciation expense will be:

= Depreciation \ Rate\times Actual \ Mileage

= 0.19\times  5000

= 950

For the year 2022, the depreciation expense will be:

= Depreciation \ Rate\times  Actual \ Mileage

= 0.19\times 19000

= 3610

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