Jayhawk Bus Lines uses the units-of-activity method in depreciating its buses. O
ID: 2442513 • Letter: J
Question
Jayhawk Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2010, at a cost of $189,040. Over its 4-year useful life, the bus is expected to be driven 222,400 miles. Salvage value is expected to be $11,120.(a) Compute the depreciation cost per unit
Prepare a depreciation schedule assuming actual mileage was: 2010, 55,600; 2011, 72,280; 2012, 56,990; and 2013, 37,530. (Round depreciation cost per unit to 2 decimal places, e.g. 0.20 and all other answers to 0 decimal places, e.g. 25,330.)
Computation
End of Year
Years
Units of Activity
×
Depreciation Cost/Unit
=
Annual Depreciation Expense
Accumulated Depreciation
Book Value
2010
2011
2012
2013
Explanation / Answer
(a) Compute the depreciation cost per mile
Depreciation per mile = ($189,040 - $11,120) / 222,400 mile
Depreciation per mile = $0.80/ mile
Annual Depreciation Expense = Units of Activity × Depreciation Cost/Unit
2010 = 55,600mile x $0.80 = $44,480
2011 = 72,280 mile x $0.80 = $57,824
2012 = 56,990 mile x $0.80 = $45,592
Years
Actual mileage
Depreciation for Period
2010
55,600
$44,480
2011
72,280
$57,824
2012
56,990
$45,592
2013
37,530
$30,024
Book value at
Depreciation
Accumulated
Book value at
beginning of year
expense
depreciation
end of year
$189,040
$44,480
$44,480
$144,560
$144,560
$57,824
$102,304
$86,736
$86,736
$45,592
$147,896
$41,144
$41,144
$30,024
$177,920
$11,120
book value = original cost accumulated depreciation Book value at the end of year becomes book value at the beginning of next year. The asset is depreciated until the book value equals scrap value(11,120)
Years
Actual mileage
Depreciation for Period
2010
55,600
$44,480
2011
72,280
$57,824
2012
56,990
$45,592
2013
37,530
$30,024
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