During the first two years, Supplies, Inc. drove the truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $175,000. If the truck has an estimated life of 10 years or 300,000 miles, with an estimated residual value of $25,000, what amount of depreciation expense should Supplies, Inc. record in the second year using the activity-based method

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Business

Barrett

1 February, 05:06

During the first two years, Supplies, Inc. drove the truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $175,000. If the truck has an estimated life of 10 years or 300,000 miles, with an estimated residual value of $25,000, what amount of depreciation expense should Supplies, Inc. record in the second year using the activity-based method

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Keyla · Answer 1

Depreciation Expense for the 2nd Year = $11,000'

Explanation:

Depreciation Expense = (Cost - Salvage Value) * Actual Activity Performed

During the 2nd year

Total Estimated Lifetime Activity Of the Asset

Depreciation Expense = ($ 175,000 - $ 25,000) * 22,000 / 300,000

Depreciation Expense = ($ 150,000) * 22,000 / 300,000

Depreciation Expense = (3300,000,000 / 300,000

Depreciation Expense = $11,000

Depreciation Expense = (Cost - Salvage Value) * Actual Activity Performed

During the 1st year

Total Estimated Lifetime Activity Of the Asset

Depreciation Expense = ($ 175,000 - $ 25,000) * 15,000 / 300,000

Depreciation Expense = ($ 150,000) * 15,000 / 300,000

Depreciation Expense = (2250,000,000 / 300,000

Depreciation Expense = $7500