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.

For the Declining-balance method, the company uses the double-declining rate. For the units-of-activity method, total miles are expected to be 112000. Actual miles of use in the first 3 years were 2016, 27500; 2017, 33000; 2018, 30500

1. For bus #3, calculate depreciation expense per mile under units-of-activity method.

2. Compute the amount of accumulated depreciation on each bus at December 31, 2017.

3. If Bus 2 was purchased on April 1 instead of January 1, what is the depreciation expense for this bus in 2015 and 2016?

bus Acquired Cost Salvage Vale Useful Life in Years Depreciation Method 1 1/1/15 $97600 $8000 5 Straight line 2 1/1/15 $114000 $11000 5 Declining Balance 3 1/1/16 $76200 $9000 4 Units-of-Activity

Explanation / Answer

1) Depreciation expense per mile = (76200-9000/112000) = 0.60 per mile

2) Calculate accumlated depreciation for december 31, 2017

3) 2015 Depreciation = 114000*20%*9/12 = 17100

2016 Depreciation = (114000*20%*3/12+114000*80%*20%*9/12) = 19380

Accumlated depreciation BUS 1 (97600-8000/5)*3 53760 BUS 2 (114000*20%+114000*80*20%+114000*80%*80%*20%) 55632 BUS 3 (27500+33000)*.60 36300

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