Problem 9-2A In recent years, Avery Transportation purchased three used buses. B
ID: 2509111 • Letter: P
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 $_____ $_____
Explanation / Answer
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
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
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