In recent years, Avery Transportation purchased three used buses. Because of fre

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

Acquired

Cost

Salvage
Value

Useful Life
in Years

Depreciation
Method

For the declining-balance method, the company uses the double-declining rate. For the units-of-activity method, total miles are expected to be 126,000. Actual miles of use in the first 3 years were 2016, 24,000; 2017, 31,500; and 2018, 30,000.

For Bus #3, calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.)

Bus

Acquired

Cost

Salvage
Value

Useful Life
in Years

Depreciation
Method

1 1/1/15 $ 98,300 $ 7,000 5 Straight-line 2 1/1/15 118,000 10,000 4 Declining-balance 3 1/1/16 88,640 8,000 4 Units-of-activity

Explanation / Answer

Solution-

calculate depreciation expense per mile under units-of-activity method Bus Acquired Cost Salvage Useful Life Depreciation   Value in Years Method                              3                    42,370                    88,640                      8,000                              4 Unit of activity Cost-Salvage                    80,640 Total miles                    126,000                      2,016                      2,017                      2,018                      2,019 Total                    24,000                    31,500                    30,000                    40,500                  126,000 Formula (Balancing Figure) Depreciation Miles run/Total Miles expected*Cost-SalvageValue Calculation 24000/126000*80640 31500/126000*80640 30000/126000*80640 40500/126000*80640 Result $           15,360.00 $           20,160.00 $           19,200.00 $           25,920.00 Depriciation Exp. Per mile Total Dep/Total expected miles 80640/126000                         0.64

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