Question

A truck acquired at a cost of $405,000 has an estimated residual value of $24,450, has an estimated useful life of 43,000 miles, and was driven 3,400 miles during the year. Determine the following. If required, round your answer for the depreciation rate to two decimal places.(a) The depreciable cost (b) The depreciation rate

Answer 1

Answer:

a.

The depreciable cost is $380550

b.

The depreciation rate is $8.85 per mile

Explanation:

a.

The depreciable cost is the cost that qualifies to be charged as depreciation expense over the estimated useful life of the asset. The depreciable cost is the cost of the asset less salvage or residual value of the asset.

Depreciable cost = Cost - Residual value

Depreciable cost = 405000 - 24450  = $380550

b.

The depreciation rate under units of production method for depreciation is the per unit depreciation expense. The per unit depreciation under this method is calculated as follows,

Per unit Depreciation or Depreciation rate = 380550 / 43000  = $8.85 per mile