A tractor acquired at a cost of $420,000 has an estimated residual value of $30,000, has an estimated useful life of 25,000 hours, and was operated 1,850 hours during the year.
Determine (a) the depreciable cost, (b) the depreciation rate, and (c) the units-of-activity depreciation for the year.
Answer:
a. $390,000 ($420,000 – $30,000)
b. $15.60 per mile ($390,000 ÷ 25,000 miles)
c. $28,860 (1,850 miles × $15.60)