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24 August, 04:18

A truck acquired at a cost of $80,000 has an estimated residual value of $8,000, has an estimated useful life of 200,000 miles, and was driven 18,000 miles during the year. Determine the following. If required, round your answer for the depreciation rate to 2 decimal places. (a) The depreciable cost (b) The depreciation rate (c) The units-of-activity depreciation for the year per mile

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  1. 24 August, 04:26
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    a. The depreciable cost is $72000.

    b. The depreciation rate is $0.36 per mile.

    c. The depreciation expense for the year is $6480.

    Explanation:

    a.

    The depreciable cost is the cost that is eligible for depreciation. It is calculated by deducting the residual value from the cost of the asset.

    Depreciable cost = Cost - residual value

    Depreciable cost = 80000 - 8000 = $72000

    b.

    The depreciation rate can be calculated by dividing the depreciable cost by the total estimated useful life of the asset.

    The depreciable rate = 72000 / 200000 = $0.36 per mile driven

    c.

    The units of activity depreciation for the year is,

    Depreciation expense = 0.36 * 18000 = $6480
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