Question

Problem 9-2A 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 1/1/15 $ 98,300 $ 7,000 5 Straight-line

2 1/1/15 118,000 10,000 4 Declining-balance

3 1/1/16 88,640 8,000 4 Units-of-activity

For the declining-balance method, the company uses the double-declining rate. For the units-of-activity method, total miles are expected to be 126,000. Actual miles of use in the first 3 years were 2016, 24,000; 2017, 31,500; and 2018, 30,000.

For Bus #3, calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.)

Depreciation expense $________ per mile

Compute the amount of accumulated depreciation on each bus at December 31, 2017. (Round depreciation cost per unit to 2 decimal places, e.g. 0.50 and depreciation rate to 0 decimal places, e.g. 15%. Round final answers to 0 decimal places, e.g. 2,125.)

Accumulated depreciation

BUS 1 $ ________

BUS 2 $ ________

BUS 3 $ ________

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? (Round answers to 0 decimal places, e.g. 2,125.)

(1) 2015 (2) 2016

Depreciation expense $_____ $_____

Answer 1

1-	depreciation expense per mile under units-of-activity method	(88640-8000)/126000	0.64	per mile
2-	Bus 1
	cost of machine		98300
	scrap value		7000
	depreciation base		91300
	life of bus		5 years
	straight line depreciation rate	1/5	20%
	Year		annual depreciation
	2015	91300*20%	18260
	2016	91300*20%	18260
	2017	91300*20%	18260
	total accumulated depreciation		54780
	Bus-2
	cost of machine		118000
	scrap value		10000
	depreciation base		108000
	life of bus		4 years
	straight line rate of depreciation	1/4	25%
	double declining rate	25*2	50%
	Year	cost of bus	double declining rate	annual depreciation	year end balance
	1	108000	50%	54000	54000
	2	54000	50%	27000	27000
	3	27000	50%	13500	13500
	total accumulated depreciation			94500
	Bus 3	miles in use	depreciation expense per mile	annual depreciation = miles*depreciation expense per mile
	miles in use in 2016	24000	0.64	15360
	miles in use in 2017	31500	0.64	20160
	total accumulated depreciation Dec 31 2017			35520
	Year	cost of bus	double declining rate	annual depreciation	year end balance
	dec 31 2015	108000	50%	40500	67500
	2016	67500	50%	33750	33750
	total accumulated depreciation dec 31 2017			74250
	Depreciation for 2015	108000*50%*9/12	40500