Question
In: Accounting
In recent years, Avery Transportation purchased three used buses. Because of frequent turnover in the accounting department
In recent years, Avery Transportation purchased three used buses. Because of frequent turnover in the accounting department, a different accountant selected the depreciation method for each bus, and various methods were selected. Information concerning the buses is summarized as follows.
For the declining-balance method, the company uses the double-declining rate. For the units-of-activity method, total miles are expected to be 120,000. Actual miles of use in the first 3 years were 2016, 24,000; 2017, 34,000; and 2018, 30,000.
Instructions
(a) Compute the amount of accumulated depreciation on each bus at December 31, 2017.
(b) If Bus 2 was purchased on April 1 instead of January 1, what is the depreciation expense for this bus in (1) 2015 and (2) 2016?
Solutions
Expert Solution
a)
| Cost of Bus | $ 96,000 |
| Less: Salvage value | $ (6,000) |
| Depreciable value | $ 90,000 |
| Useful life | 5 Years |
| Depreciation expense per year ($90,000/5) | $ 18,000 |
| Accumulated depreciation on December 31, 2017 ($18,000*3) | $ 54,000 |
| Year | Book value | Depreciation | Accumulated deprciation |
| 31/12/2015 | $ 96,000 | $96,000/4*2 = $48,000 | $ 48,000 |
| 31/12/2016 | $96,000-$48,000 = $48,000 | $48,000/4*2 = $24,000 | $48,000+$24,000 = $72,000 |
| 31/12/2017 | $48,000-$24,000 = $24,000 | $24,000/4*2 = $12,000 | $72,000+$12,000 = $84,000 |
| Cost of Bus | $ 96,000 |
| Less: Salvage value | $ (6,000) |
| Depreciable value | $ 90,000 |
| Expected units to be purchased | 120,000 |
| Depreciation expense for 2016 ($90,000/120,000*24,000) | $ 18,000 |
| Depreciation expense for 2017 ($90,000/120,000*34,000) | $ 25,500 |
| Accumulated depreciation on 2017 ($18,000+$25,500) | $ 43,500 |
b)
| Year | Book value | Depreciation | Accumulated deprciation |
| 31/12/2015 | $ 96,000 | $96,000/4*2*9/12 = $36,000 | $ 36,000 |
| 31/12/2016 | $96,000-$36,000 = $60,000 | $60,000/4*2 = $30,000 | $36,000+$30,000 = $66,000 |
| 31/12/2017 | $60,000-$30,000 = $30,000 | $30,000/4*2 = $15,000 | $66,000+$15,000 = $81,000 |
a)
| Cost of Bus | $ 96,000 |
| Less: Salvage value | $ (6,000) |
| Depreciable value | $ 90,000 |
| Useful life | 5 Years |
| Depreciation expense per year ($90,000/5) | $ 18,000 |
| Accumulated depreciation on December 31, 2017 ($18,000*3) | $ 54,000 |
Junaid answered 2 years agoRelated Solutions
In recent years, Avery Transportation purchased three used buses. Because of frequent turnover in the accounting...
In recent years, Avery Transportation purchased three used
buses. Because of frequent turnover in the accounting department, a
different accountant selected the depreciation method for each bus,
and various methods were selected. Information concerning the buses
is summarized as follows.
Bus
Acquired
Cost
Salvage
Value
Useful Life
in Years
Depreciation
Method
1
1/1/13
$97,200
$5,700
5
Straight-line
2
1/1/13
122,000
10,000
5
Declining-balance
3
1/1/14
78,200
8,000
4
Units-of-activity
For the declining-balance method, the company uses the
double-declining rate. For...
In recent years, Avery Transportation purchased three used buses. Because of frequent turnover in the accounting...
In recent years, Avery Transportation purchased three used
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different accountant selected the depreciation method for each bus,
and various methods were selected. Information concerning the buses
is summarized as follows. Bus Acquired Cost Salvage Value Useful
Life in Years Depreciation Method 1 1/1/15 $ 96,000 $ 6,500 5
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Bus Acquired Cost Salvage Value Useful Life in Years
Depreciation Method
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