In recent years, Avery Transportation purchased three used buses. Because of fre
ID: 2461411 • Letter: I
Question
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
AQUIRED
COST
SALVAGE VALUE
USEFUL LIFE IN YEARS
DEPRECIATION METHOD
1
1/1/13
96000
6000
5
Stright-Line
2
1/1/13
11000
10000
4
Declining-Balance
2
1/1/14
92000
8000
5
Units-of-Activity
Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.)
1) What is the depreciation exspense per mile?
2) Compute the amount of accumulated depreciation on each bus at December 31, 2015. (Round answers to 0 decimal places, e.g. 2,125.)
2015
BUS 1 = ?
BUS 2 = ?
BUS 3 = ?
3)
If Bus 2 was purchased on April 1 instead of January 1, what is the depreciation expense for this bus in 2013 and 2014? (Round answers to 0 decimal places, e.g. 2,125.)
WHAT WOULD BE THE DEPRECIATION EXSPENSE FOR 2013 & 2014?
BUS
AQUIRED
COST
SALVAGE VALUE
USEFUL LIFE IN YEARS
DEPRECIATION METHOD
1
1/1/13
96000
6000
5
Stright-Line
2
1/1/13
11000
10000
4
Declining-Balance
2
1/1/14
92000
8000
5
Units-of-Activity
Explanation / Answer
I think there is a misprint in the cost of the 2nd bus as it is 11000 & its salvage value is 10000 so, i have solved the question by taking the cost 140000 to give a idea on the way of solving such problems.
1.) Supose the bus 3 is expected to run 42000 miles.
Depreciation per mile = cost -salvage value/ total miles = 92000 - 8000 / 42000 = $ 2 .
2.) a)1st bus: 1/1/12 $ 96,000 $ 6,000 5 As per Straight-line
Dec 31, 2014 $122,500
Dec 31, 2015 $63,700
I think there is a misprint in the cost of the 2nd bus as it is 11000 & its salvage value is 10000 so, i have solved the question by taking the cost 140000 to give a idea on the way of solving such problems.
1.) Supose the bus 3 is expected to run 42000 miles.
Depreciation per mile = cost -salvage value/ total miles = 92000 - 8000 / 42000 = $ 2 .
2.) a)1st bus: 1/1/12 $ 96,000 $ 6,000 5 As per Straight-line
therefore Annual depreciation: ($96,000 - $ 6,000)/5 = $18,000 Accumulated depreciation at: Dec 31, 2012 $18,000 (1 yr) Dec 31, 2013 $36,000 (2 yrs) Dec 31, 2014 $54,000 (3 yrs) 2) b) 2nd bus: 1/1/12 140,000 10,000 4 As per Declining-balance If useful life is 4 yrs, straight-line rate is 25%, so DDB rate is 50% Original cost $140,000 2012 depreciation $70,000 ($140,000 x 50%) Book value at end 2012 $70,000 2013 depreciation $35,000 ($70,000 x 50%) Book value at end 2013 $35,000 2014 depreciation $17,500 ($35,000 x 50%) Book value at end 2014 $17,500 2015 depreciation $7,500 (this is the difference between $17,500 and the salvage value) Book value at end 2015 $10,000 (book value cannot fall below salvage value) Accumulated depreciation at: Dec 31, 2012 $70,000 Dec 31, 2013 $105,000Dec 31, 2014 $122,500
2) c) 3rd bus: 1/1/13 92,000 8,000 5 As per Units-of-activity Depreciation per mile = (92,000 - 8,000)/120,000 miles = $0.70 per mile Depreciation for 2013 = 24,000 x $0.70 = $16,800 Depreciation for 2014 = 36,000 x $0.70 = $25,200 Depreciation for 2015 = 31,000 x $0.70 = $21,700 Accumulated depreciation at: Dec 31, 2013 $16,800 Dec 31, 2014 $42,000Dec 31, 2015 $63,700
3) Cost $140,000 on April 1 2012 depreciation $52,500 ($140,000 x 50% x 9/12) Book value at end 2012 $87,500 2013 depreciation $43,750 ($87,500 x 50%) Book value at end 2013 $43,750 2014 depreciation $21,875 ($43,750 x 50%) Book value at end 2014 $21,875 2015 depreciation $10,938 ($21,875 x 50%)) Book value at end 2015 $10,937 2016 depreciation $937 (difference between $10,937 and salvage value) Book value at end 2016 $10,000 (book value cannot fall below salvage value) Depreciation expense 2012 $52,500 2013 $43,750Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.