help with study question Avery transportation purchased three buses. for the dec

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help with study question

Avery transportation purchased three buses. for the declining balance method the company uses the double decline rate. for units of activity total miles are expected to be 121300. actual miles use in the first three years we're 2013 25400
2014 35800 and 2015 32300.

bus 1 acquired 1/1/12 cost 95500 salvage value 7100 useful life 4 straight line depreciation.

bus 2 acquired 1/1/12 cost 114000 salvage value 10600 useful life 4 declining balance method

bus 3 acquired 1/1/13 cost 80980 salvage value 8200 useful life years 5 units of activity method

1)for bus 3 calculate depreciation expense per mile units activity.

2)compute the amount of accumulated depreciation on each bus 1 2 and 3. at December 31 2014.

3)if bus 2 was purchased April 1st instead what is the depreciation expense for this bus 2012 and 2013?

Explanation / Answer

1) FOr bus 3, depreciation expense per mile units acivity = (book value - depreciaition) expected/units of product

= (80980-8200)/121300 = $0.6 per mile

2) The amount of Accumulated depreciaiton for bus 1 =( 95500-7100)/4 = $22100x3 = $66300

Accumulated Depreciation for bus 1 for 3years = $66300

The Accumulated Depreciation for bus 2 for 3 years = 2xstraight line rate x book value at beginnning of the year

straight line rate = 114000-10600 = 103400/4 = $25850 /114000 = 0.25 or 25%

= 2 x 25% x 103400 = $51700 - Year 1

= 2 x25%x 51700 = $ 25850 - Year 2 (103400 - 51700 =$ 51700)

= 2 x 25% x 25850 = $12925 - year 3

Total accumulated depreciation for 3 years for bus 2 = 51700+25850+12925 = $90475

Accmulated depreciaiton for bus 3 for 2 years = (80980-8200)/(25400+35800) = 72780/61200 = $1.19

3) if BUs 2 was purchased in april , depreciaiton expense for year 1 = (114000-10600) /4 = 25850/114000 = 25%

Depreciation expense= 2x25% x 103400 = $51700

Depreciation Expense year 2 = 2 x 25% x (103400-51700) = 2x25%x51700 = $25850

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