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

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)