During the first two years, MOM, Inc., drove their truck 71,500 and 66,950 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $153,200. If the truck has an estimated life of 7 years or 400,000 miles, with an estimated residual value of $45,200, what amount of depreciation expense should MOM record in the second year using the activity-based method?
The process of depreciation involves the expensing of use for long-term assets. The depreciation method used depends on what method best captures the loss of value in long-term assets over time.
Answer and Explanation: 1
We begin by finding the depreciation expense per mile driven using the following formula:
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fromChapter 5 / Lesson 14
Learn about different methods of depreciation and depreciation expense, including: straight-line and declining methods, as well as the difference between physical depreciation and economic depreciation.