Rosco Taxi Service uses the units-of-activity method in computing depreciation o
ID: 2512475 • Letter: R
Question
Rosco 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 no. 10 cost $39,500 and is expected to have a salvage value of $500. Taxi no. 10 is driven 30,000 miles in year 1 and 20,000 miles in year 2.
Year 1
Year 2
Rosco 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 no. 10 cost $39,500 and is expected to have a salvage value of $500. Taxi no. 10 is driven 30,000 miles in year 1 and 20,000 miles in year 2.
Your answer is correct. Calculate depreciation cost per mile using unit-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.)Depreciation cost $ per mile Attempts: 1 of 1 used Compute the depreciation for each year. (Round answers to 2 decimal places, e.g. 2,125.50.)
Year 1
Year 2
Depreciation $ $Explanation / Answer
(a)Depreciation cost per mile using unit-of-activity method
Depreciation cost per mile = (Cost of Asset - Residual Value) / Estimated Total Miles
= ( (39,500 - $500 ) / 150000 Miles
= $0.26 per mile
(b)Depreciation for Year 1 and Year 2
Depreciation for Year 1 = Depreciation cost per mile x Actual Miles
= $ 0.26 x 30,000 Miles
= $7,800
Depreciation for Year 2 = Depreciation cost per mile x Actual Miles
= $ 0.26 x 20,000 Miles
= $5,200
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