Problem 9-2A (Part Level Submission) In recent years, Avery Transportation purch

Question

Problem 9-2A (Part Level Submission) 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 Useful Life in Years 4 Salvage Depreciation Method Value 5,500 11,000 Bus Acquired Cost 99,000 124,000 78,300 Straight-line Declining-balance Units-of-activity 2 7,500 5 For the declining-balance method, the company uses the double-declining rate. For the units-of-activity method, total miles are expected to be 118,000. Actual miles of use in the first 3 years were 2016, 24,500; 2017, 31,000; and 2018, 32,500

Explanation / Answer

Bus Acquistion Date Cost Salvage Life Method 1 01-01-2015 99000 5500 4 SLM 2 01-01-2015 124000 11000 5 Double Declining 3 01-01-2016 78300 7500 5 Unit of Activity Unit of Activity 2016 24500 2017 31000 Total Activity 118000 2018 32500 A1 Depreciation Expense per Mile for Bus 3: Purchase Cost 78300 Less: Salvage Cost 7500 Depreciable Value 70800 Total Activity 118000 Expense per Mile 0.60 A2 Accumulated Depreciation as at 31-12-2017: Bus Accumulated Dep Bus Cost Salvage Life 1 70125 (WN on Right Side) 1 99000 5500 4 2 97216 (WN on Right Side) 2 124000 11000 5 3 33300 (31000+24500)*0.60 3 78300 7500 5 B Purchase of Bus 2 on April 1: Bus 1 Acquistion Date 01-01-2015 Year 2015 Beginning Value 124000 Cost 99000 Depreciation 37200 (124000*40%*9/12) Salvage 5500 Depreciable Value 93500 Year 2016 Useful Life 4 Beginning Value 86800 (124000-37200) Depreciation PA 23375 Depreciation 34720 (86800*40%) Bus 2 2015 2016 Acquistion Date 01-01-2015 Depreciation 37200 34720 Rate of Depreciation 1/Life 20.00% Double D Rate 40% Year 2015 Beginning Value 124000 Depreciation 49600 (124000*40%) Year 2016 Beginning Value 74400 (124000-49600) Depreciation 29760 Year 2017 Beginning Value 44640 Depreciation 17856

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