Problem 10-2A Bus Acquired Cost Salvage Value Useful Life in Years Depreciation
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Problem 10-2A
Bus
Acquired
Cost
Salvage
Value
Useful Life
in Years
Depreciation
Method
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2014
BUS 1
BUS 2
BUS 3
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2012
2013
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Problem 10-2A
Bus
Acquired
Cost
Salvage
Value
Useful Life
in Years
Depreciation
Method
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2014
BUS 1
BUS 2
BUS 3
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2012
2013
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Problem 10-2A
Bus
Acquired
Cost
Salvage
Value
Useful Life
in Years
Depreciation
Method
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2014
BUS 1
BUS 2
BUS 3
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2012
2013
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Problem 10-2A
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.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 116,300. Actual miles of use in the first 3 years were: 2013, 27,600; 2014, 35,700; and 2015, 32,100.
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Explanation / Answer
Answer 1. BUS 1. Depreciation as per Straight Line Method = (96900 - 8000) / 4 years = $22,225 per annum Bus 2 Dep Rate Under Double Declining Method = 2 X 20% (Straight Line Method) = 40% Calculation of Depreciation Purchase Cost - 1/1/12 111,000 Less: Dep - 2012 - 40% 44,400 Book Balance as on 31/12/12 66,600 Less: Dep - 2013 - 40% 26,640 Book Balance as on 31/12/13 39,960 Less: Dep - 2014 - 40% 15,984 Book Balance as on 31/12/14 23,976 Bus 3 Depreciation Expense Per Mile = (89510 - 8100) / 116300 Miles Depreciation Expense Per Mile = $0.70 per Mile Deprecaiation Charged in 2013 - 27600 Miles X $0.70 = 19,320 2014 - 35700 Miles X $0.70 = 24,990 Accumulated Dep. At Dec. 31, 2014 Bus 1 - $22,225 + 22525 44,450 Bus 2 - 44400 + 26640 71,040 Bus 3 - 19320 + 24990 44,310 Answer 2. Bus 2 is Purchased on April 1, 2012 Purchase Cost - 1/1/12 111,000 Less: Dep - 2012 - 111,000 X 40% X 9/12 33,300 Book Balance as on 31/12/12 77,700 Less: Dep - 2013 - 40% 31,080 Book Balance as on 31/12/13 46,620 Less: Dep - 2014 - 40% 18,648 Book Balance as on 31/12/14 27,972
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