Problem 10-2A In recent years, Avery Transportation purchased three used buses.
ID: 2585712 • Letter: P
Question
Problem 10-2A 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. Salvage Value Useful Life in Years Depreciation Method Bus Acquired Cost 95,00 6,000 Straight-line 2 1/1/15 125,000 10,500 Dedining-balance 3 1/1/16 90,600 8,0004Units-of-activity For the dedining-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, 27,500; 2017, 36,000; and 2018, 33,000.Explanation / Answer
Answer:
1
calculate depreciation expense per mile under units-of-activity method.
For BUS No:3
Depreciation expense
=(90600-8000) ÷ 118,000 miles
= $82,600 ÷ 118,000 miles
= $0.7 per mile.
___________________________________________
Compute the amount of accumulated depreciation on each bus at December 31, 2019
Accumulated
Year
Depreciation
Computation
31-Dec
BUS 1
2015
$ 89,600 × 20% = $17920
$17,920
2016
$ 89,600 × 20% = $17920
$35,840
2017
$ 89,600 × 20% = $17920
$53,760
BUS 2
2015
$125,000 × 50% = $62,500
$62,500
2016
$ 62,500 × 50% = $31,250
93,750
2017
$ 31,250 × 50% = $16,625
96,250
BUS 3
2018
27,500 miles × $0.7* = $19,250
$19,250
2019
36,000 miles × $0.7 = $25200
44,450
Accumulated Depreciation
BUS 1
$53,760
BUS 2
96,250
BUS 3
44,450
__________________________________________________
3.
Expense
2015
$125,000 × 50% x 9/12
46875
2016
$78125x50%
39062.5
Depreciation
Year
2015
46875
2016
39062.5
Accumulated
Year
Depreciation
Computation
31-Dec
BUS 1
2015
$ 89,600 × 20% = $17920
$17,920
2016
$ 89,600 × 20% = $17920
$35,840
2017
$ 89,600 × 20% = $17920
$53,760
BUS 2
2015
$125,000 × 50% = $62,500
$62,500
2016
$ 62,500 × 50% = $31,250
93,750
2017
$ 31,250 × 50% = $16,625
96,250
BUS 3
2018
27,500 miles × $0.7* = $19,250
$19,250
2019
36,000 miles × $0.7 = $25200
44,450
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