Question

Kwik Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 150,000 miles. Taxi 10 cost $27,500 and is expected to have a salvage value of $500. Taxi 10 was driven 32,000 miles in 2021 and 33,000 miles in 2022.
a. Determine the depreciation cost. (Round answer to 2 decimal places, e.g. 1.25.)
b. Compute the depreciation for each year. (Round answers to 0 decimal places,e.g.125.)

Answer 1

Answer:

$ 0.18 per mile, $ 5, 760.00 and $ 5,940.00

Explanation:

The unit of the depreciation method calculates the deprecation of an asset per usage.

For Tax 10:

Buying price $ 27,500

salvage value: $ 500

Expected usage: 150,000 miles

Depreciation cost =(Original Value − Salvage Value)/​Estimated Production Capability

Depreciable amount: = $ 27,500- $ 500

    = $27,000

Depreciation cost= $27,000/150,000

     = $ 0.18 per mile

B: Depreciation for 2021: Usage 32,000 miles

  =32,000x0.18= $ 5, 760.00

Depreciation for 2022: usage 33,000 miles

=33,000x 0.18 = $ 5,940.00