00:01
Okay, for this problem, we have information provided, which is $175 ,000 cost or purchase price for this asset, which is a vehicle, and that it has a 10 -year life.
00:22
Its life is also estimated to have 300 ,000 miles, and a $25 ,000 salvage value.
00:35
So the question is, after two years, what is the depreciation expense in year two based on activity -based depreciation? so to do that, we need to determine a rate for depreciation expense for each year, and it's the same thing every year.
01:08
So you determine it at the beginning, and so you take the cost, which is the 175 ,000, 175 ,000, and then you subtract the same thing.
01:17
Salvage value, which is 25 ,000.
01:22
And you divide it by the units of production or miles in this case, which is 300 ,000.
01:30
So you get 150 ,000 over 300 ,000, and two, yeah, there we go, okay, which equals one -half or 0 .5.
01:44
And then this is your rate.
01:47
So you multiply, you multiply, this rate by the number of miles incurred during the year for your depreciation expense that year...