Exercise 9-19 Whippet Bus Lines uses the units-of-activity method in depreciatin

Question

Exercise 9-19 Whippet Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2017, at a cost of $119,000. Over its 4-year useful life, the bus is expected to be driven 210,000 miles. Salvage value is expected to be $7,700. Compute the depreciation cost per unit. (Round answer to 3 decimal places, e.g. 6.251) Depreciation cost per unit s o; 2019, 48 79 and 2020 32 10 Round depreciation cost perunit to 3 decima/ places, eg Prepare a depreciation schedule assuming actual mileage was: 2017, 47,600; 2018, ? 0.125 and other answers to O decimal places, e.g. 125) Computation End of Year Years Units of Activity X Depreciation Cost/UnitAnnual Depreciation Expense Accumulated Depreciation Book Value 2017 2018 2019 2020

Explanation / Answer

1 Original Cost 119000 Less: Salvage Cost 7700 Depreciable Cost 111300 Total Usage 210000 Depreciation Cost PU 0.53 (111300/210000) Computation End of Year Year Units of ActivityX Depreciation Cost PU= Annual Depreciation Accumulated Depreciation Book Value 2017 47600 0.53 25,228 25,228 93,772 2018 61880 0.53 32,796 58,024 60,976 2019 48790 0.53 25,859 83,883 35,117 2020 32130 0.53 17,029 1,00,912 18,088 2 Original Cost 86300 Less: Salvage Cost 8600 Depreciable Cost 77700 Total Usage 67200 Depreciation Cost PU 1.156250 (77700/67200) Activity for 2017 490 Depreciation Exp 566.5625 (Rate*490) Double Declining Method: Original Cost 86300 Less: Salvage Cost 8600 77700 Life 8 Rate 1/Life Rate 12.50% Double Rate 25.00% Original Cost 86300 Double Rate 25% Depreciation for 2017 5393.75 (86300*25%*3/12) 2018 Opening Book Value 80906.25 Double Rate 25% Depreciation for 2018 20,226.56 (80906.25*25%)

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