Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / AP Kwik Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs

AP Kwik Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs

Accounting

AP Kwik Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 150,000 miles. Taxi 10 cost $27,500 and is expected to have a salvage value of $500. Taxi 10 was driven 32,000 miles in 2021 and 33,000 miles in 2022. Compute the depreciation for each year. UNI

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Depreciation expense for 2021 = $5760

Depreciation expense for 2022 = $5940

Explanation :

2021 :

Expected miles to be driven = 150000

Cost of Taxi = $27500

Salvage value = $500

Depreciation base = Cost of taxi - Salvage value

= $27500 - $500 = $27000

Miles driven in 2021 = 32000

Depreciation expense for 2021 = [Depreciation base / Expected miles to be driven] x Miles driven in 2021

= [$27000/150000] x 32000

= $0.18 x 32000 = $5760

2022 :

Expected miles to be driven = 150000

Cost of Taxi = $27500

Salvage value = $500

Depreciation base = Cost of taxi - Salvage value

= $27500 - $500 = $27000

Miles driven in 2022 = 33000

Depreciation expense for 2022 = [Depreciation base / Expected miles to be driven] x Miles driven in 2022

= [$27000/150000] x 33000

= $0.18 x 32000 = $5940