Grimwood Trucking purchased a tractor trailer for $98,000. Interline uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $14,000. If the truck is driven 90,000 miles in its first year, how much depreciation expense should Grimwood record?

Question

Quizplus · Accepted Answer

The depreciation expense is calculated using the units-of-activity method: (Cost - Salvage Value) / Total Estimated Miles * Miles Driven in Year 1 = ($98,000 - $14,000) / 1,000,000 miles * 90,000 miles = $7,560.

Grimwood Trucking Purchased a Tractor Trailer for $98,000