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Donkey Inc. has a fleet of 10 large trucks that cost a total of $1,410,000. The fleet is expected to be driven a total of 1,000,000 miles during its estimated 10-year life and be sold for $141,000 at the end of its useful life. If the fleet was driven 125,000 miles during the current year, what is the amount of depreciation that would be calculated using the straight-line and units-of-production methods, respectively

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Answer:

$126,900

$125,000

Explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

( $1,410,000 -  $141,000) / 10 = $126900

Activity method based on activity = (miles that year / total miles expected to be driven) x (Cost of asset - Salvage value)

( $1,410,000 -  $141,000)  x ( 125,000 / 1,000,000) =  125,000

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