Crestview Estates purchased a tractor on January 1,2018,for $65,000.The tractor's useful life is estimated to be 30,000 miles and has a residual value of $5,000.If Crestview used the tractor 5,000 miles in 2018 and 3,000 miles in 2019,what is the balance for accumulated depreciation at the end of 2019 using the activity-based method?

Question

Quizplus · Accepted Answer

Under the activity-based method, the depreciation per mile is calculated as follows:
Depreciation per mile = (Cost - Residual value) / Estimated total miles
Depreciation per mile = ($65,000 - $5,000) / 30,000 miles = $2 per mile

Therefore, the depreciation for 2018 is:
Depreciation for 2018 = Depreciation per mile x Miles used in 2018
Depreciation for 2018 = $2 x 5,000 miles = $10,000

The accumulated depreciation at the end of 2018 is:
Accumulated depreciation at the end of 2018 = Depreciation for 2018 = $10,000

The depreciation for 2019 is:
Depreciation for 2019 = Depreciation per mile x Miles used in 2019
Depreciation for 2019 = $2 x 3,000 miles = $6,000

The accumulated depreciation at the end of 2019 is:
Accumulated depreciation at the end of 2019 = Accumulated depreciation at the end of 2018 + Depreciation for 2019
Accumulated depreciation at the end of 2019 = $10,000 + $6,000 = $16,000

Therefore, the balance for accumulated depreciation at the end of 2019 using the activity-based method is $16,000, which is option C.

Crestview Estates Purchased a Tractor on January 1,2018,for $65,000