Bus Acquired Cost Salvage Value Useful Life in Years Depreciation Method (a1) In

Question

Bus

Acquired

Cost

Salvage
Value

Useful Life
in Years

Depreciation
Method

(a1)

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 $ 96,800 $ 7,500 5 Straight-line 2 1/1/15 111,000 10,500 4 Declining-balance 3 1/1/16 92,900 7,500 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 122,000. Actual miles of use in the first 3 years were 2016, 25,000; 2017, 31,000; and 2018, 32,000.

Explanation / Answer

depreciation expense per mile under units-of-activity method = (92,900 - 7,500)/122,000

depreciation expense per mile under units-of-activity method = 0.70

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