Danford Trucking purchased a tractor trailer for $126,000. Danford 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 $18,000. If the truck is driven 80,000 miles in its first year, how much depreciation expense should Danford record?

Question

Quizplus · Accepted Answer

The depreciation expense is calculated using the formula: (Cost - Salvage Value) / Total Expected Miles * Miles Driven in Year. Thus, ($126,000 - $18,000) / 1,000,000 miles * 80,000 miles = $8,640.

Danford Trucking Purchased a Tractor Trailer for $126,000