Rosco Taxi Service uses the units-of-activity method in computing depreciation o

Question

Rosco Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 156,000 miles. Taxi no. 10 cost $38,000 and is expected to have a salvage value of $760. Taxi no. 10 is driven 28,000 miles in year 1 and 18,400 miles in year 2. Calculate depreciation cost per mile using unit-of-activity method. Compute the depreciation for each year.By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor.

Explanation / Answer

Solution:

1.

2.

Cost of Taxicab = 38,000 Less: Salvage value = -760 Depreciable value 37,240 Expected driven miles 156,000 Depreciation cost per mile = $ 37,240 / 156,000 miles 0.24

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