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Question

A truck has an estimated useful life of 150,000.00 miles. The original cost is 60,000.00 and the salvage value is 5,000.00. The miles driven were 18,000 for the first year and 19,500 for the second year. Depreciation for the second year is

Answer 1

In order to solve this you must first determine the mileage rate for depreciation. To do this you subtract the salvage value ($5,000.00) from the original cost ($60,000) and get $55,000.

 

You then divide $55,000 by the total miles driven during the useful life which is 150,000 miles. The answer of $0.366667 is the cost per mile for depreciation purposes

 

Next you multiply the mileage driven during the second year, which is 19,500 times the rate per mile ($0.366667) and you get $7,150.00 as your second year depreciation. Just for information purposes, the first year depreciation would be 18,000 miles times $0.366667 equals $6,600.00 for the first year depreciation.

 

Hope this helps.

 

Ted Breslin, M.Ed.