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Big M's BBQ purchased a truck for $55,000 on 1/1 in Year 1
Big M's BBQ purchased a truck for $55,000 on 1/1 in Year 1. The truck is expected to have a five- year life or last 100,000 miles and have a residual value of $10,000. The truck was driven as follows for year 1 & 2: • Year 1 - 13,000 miles • Year 2 - 12,000 miles If the activity based depreciation method is used, what will be the li ok value of the truck at the end of Year 2 on 12/31? Fill in the blank with your calculated number. DO NOT include commas, $ signs, period, decimal points, etc.. just enter the raw number. Webcourses will add commas to your answer automatically. For example, if you calculated the answer to be $24, 123, you would only input: 24123
Expert Solution
Cost of truck = 55000
Residual value of truck = 10000
Useful life in miles = 100000
Depreciation per mile = (Cost - residual value)/Useful life = (55000-10000)/100000 = $0.45
Miles driven at the end of two years = 13000 + 12000 = 25000.
Total depreciation for two years = 25000 * 0.45 = 11250
Value of truck after two years = 55000 - 11250 = 43750
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