Exercise 9-19 Whippet Bus Lines uses the units-of-activity method in depreciatin
ID: 2508756 • Letter: E
Question
Exercise 9-19
Whippet Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2017, at a cost of $130,000. Over its 4-year useful life, the bus is expected to be driven 210,000 miles. Salvage value is expected to be $8,200.
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Computation
End of Year
Years
Units of Activity
Depreciation Cost/Unit
Annual Depreciation Expense
Accumulated Depreciation
Book Value
Exercise 9-19
Whippet Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2017, at a cost of $130,000. Over its 4-year useful life, the bus is expected to be driven 210,000 miles. Salvage value is expected to be $8,200.
Your answer is incorrect. Try again. Compute the depreciation cost per unit. (Round answer to 3 decimal places, e.g. 6.251)Depreciation cost per unit $
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Your answer is incorrect. Try again. Prepare a depreciation schedule assuming actual mileage was: 2017, 52,000; 2018, 67,600; 2019, 53,300; and 2020, 35,100. (Round depreciation cost per unit to 3 decimal places, e.g. 0.125 and other answers to 0 decimal places, e.g. 125)Computation
End of Year
Years
Units of Activity
×Depreciation Cost/Unit
=Annual Depreciation Expense
Accumulated Depreciation
Book Value
2017 $ $ $ $ 2018 2019 2020Explanation / Answer
Depreciation Expenses for each year using Units of Production/Activity method
Under the Units of Production method of depreciation, depreciation is charged according to the actual usage of the asset. Higher depreciation is charged when there is higher activity and less is charged when there is low level of operation. Zero depreciation is charged when the asset is idle for the whole period.
Estimated driven miles during life of Asset = 210,000 miles
Asset’s Depreciable Cost = Cost of Asset – Salvage Value = $130,000 - $8,200 = $121,800
Under the units of production method, the Asset’s Depreciable Cost of $121,800 is divided by the estimated usage i.e. miles driven over the period of useful life 210,000 Miles, resulting in depreciation rate of $0.58 per mile.
Part 1 ---- Depreciable Cost per Unit = $0.58
Part 2 --- Depreciation Schedule
Year
Units of Activity
Depreciation Cost / Unit
Annual Depreciation Expenses
Accumulated Depreciation
Book Value
2017
52000
$0.58
$30,160
$30,160
$99,840
2018
67600
$0.58
$39,208
$69,368
$60,632
2019
53300
$0.58
$30,914
$100,282
$29,718
2020
35100
$0.58
$20,358
$120,640
$9,360
Total
208000
$120,640
Year
Units of Activity
Depreciation Cost / Unit
Annual Depreciation Expenses
Accumulated Depreciation
Book Value
2017
52000
$0.58
$30,160
$30,160
$99,840
2018
67600
$0.58
$39,208
$69,368
$60,632
2019
53300
$0.58
$30,914
$100,282
$29,718
2020
35100
$0.58
$20,358
$120,640
$9,360
Total
208000
$120,640
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