Kwik taxi service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 140,000 miles. Taxi 10 cost $24,300 and is expected to have a salvage value of $700. Taxi 10 was driven 28,000 miles in 2016 and 33,000 miles in 2017. a) determine the depreciation cost. b) compute the depreciation expense for each year.

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Business

Opie

7 March, 09:44

Kwik taxi service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 140,000 miles. Taxi 10 cost $24,300 and is expected to have a salvage value of $700. Taxi 10 was driven 28,000 miles in 2016 and 33,000 miles in 2017. a) determine the depreciation cost. b) compute the depreciation expense for each year.

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Paxton Blanchard · Answer 1

Depreciation cost:

2016: expected useful life

Cost - salvage value X usage

= 140,000

24,300-700

=5.93*28,000 = $166,101.69

2017: expected useful life

Cost - salvage value X usage

= 140,000

24,300-700

=5.93*33,000 = $195,762.71

Depreciation Expense:

2016: (cost-salvage value) * actual activity performed

total estimated useful life

= (24,300-700) * 28,000

140,000

=$4,720

2017: (cost-salvage value) * actual activity performed

total estimated useful life

= (24,300-700) * 33,000

140,000

=$5,562.86