Oriole Company purchased a truck at the beginning of 2020 for $109400. The truck is estimated to have a salvage value of $4300 and a useful life of 120000 miles. It was driven 18000 miles in 2020 and 26000 miles in 2021. What is the depreciation expense for 2021

Annual depreciation 2021= $22,771.67

Explanation:

Giving the following information:

Purchase price= $109,400

Salvage value= $4,300

Useful life in miles= 120,000

It was driven 26,000 miles in 2021.

To calculate the depreciation expense, we need to use the units-of-activity method of depreciation:

Annual depreciation= [(original cost - salvage value)/useful life of production in miles]*miles drive

2021:

Annual depreciation= [(109,400 - 4,300) / 120,000]*26,000

Annual depreciation= $22,771.67

the answer is "b.the increased supply will create a surplus. "

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