ework Problem 9-2A In recent years, Avery Transportation purchased three used bu
ID: 2431480 • Letter: E
Question
ework 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 Part Level Part Level by Study Useful Life in Years Depreciation Method Salvage Bus Acquired Value Cost $95,600 120,000 6,500 11,500 8,000 Straight-line Declining-balance 83,640 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, 24,000; 2017, 32,000: and 2018, 30,000Explanation / Answer
UNIT OF ACTIVITY METHOD
Depreciation expense per mile
(cost of machine-scrap value)/ total activity
(83640-8000)/122000
0.62
year
depreciation per unit of activity
no of activities
annual depreciation
accumulated depreciation
2016
0.62
24000
14880
14880
2017
0.62
32000
19840
34720
2018
0.62
30000
18600
53320
straight line rate
1/4
0.25
double declining rate
straight line rare*2
50%
cost of machine
120000
Year
cost of machine
Double declining rate
annual depreciation
accumulated depreciation
year end balance
2015
120000
50%
120000*50%*9/12
45000
45000
75000
2016
75000
50%
75000*50%
37500
82500
157500
UNIT OF ACTIVITY METHOD
Depreciation expense per mile
(cost of machine-scrap value)/ total activity
(83640-8000)/122000
0.62
year
depreciation per unit of activity
no of activities
annual depreciation
accumulated depreciation
2016
0.62
24000
14880
14880
2017
0.62
32000
19840
34720
2018
0.62
30000
18600
53320
straight line rate
1/4
0.25
double declining rate
straight line rare*2
50%
cost of machine
120000
Year
cost of machine
Double declining rate
annual depreciation
accumulated depreciation
year end balance
2015
120000
50%
120000*50%*9/12
45000
45000
75000
2016
75000
50%
75000*50%
37500
82500
157500
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