Grimwood Trucking purchased a tractor-trailer for $171,500.Grimwood 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 $24,500.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 Expected Miles * Miles Driven in Year 1 = ($171,500 - $24,500) / 1,000,000 * 90,000 = $13,230.

Grimwood Trucking Purchased a Tractor-Trailer for $171,500