On January 1, Year 1, the City Taxi Company purchased a new taxi cab for $60,000
ID: 2557510 • Letter: O
Question
On January 1, Year 1, the City Taxi Company purchased a new taxi cab for $60,000. The cab has an expected salvage value of $18,000. The company estimates that the cab will be driven 200,000 miles over its life. It uses the units-of-production method to determine depreciation expense. The cab was driven 69,000 miles the first year and 72,000 the second year. What would be the depreciation expense reported on the Year 2 income statement and the book value of the taxi, respectively, at the end of Year 2?
Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Cost of taxi 60,000.00 Salvage Value 18,000.00 Life in miles 200,000.00 Depreciation per mile = (60000 - 18000)/200,000 0.21 Depreciation for Year 1 = 69000 * .21 14,490.00 Depreciation for Year 2 = 72000 * .21 15,120.00 book value of the taxi, respectively, at the end of Year 2 = 60000 - 14490 - 15120 30,390.00