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Question - During the current year, Central Auto Rentals purchased 60 new automobiles at a cost of $15,760 per car. The cars will be sold to a wholesaler at an estimated $4,000 each as soon as they have been driven 42,000 miles. Central Auto Rentals computes depreciation expense on its automobiles by the units-of-output method, based on mileage.
a. Compute the amount of depreciation to be recognized for each mile that a rental automobile is driven.
b. Assuming that the 60 rental cars are driven a total of 1,810,000 miles during the current year, compute the total amount of depreciation expense that Central Auto Rentals should recognize on this fleet of cars for the year.
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