Problem 9-2A (Part Level Submission) Bus Acquired Cost Salvage Value Useful Life

Question

Problem 9-2A (Part Level Submission)

Bus

Acquired

Cost

Salvage
Value

Useful Life
in Years

Depreciation
Method

(a1)

Problem 9-2A (Part Level Submission)

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

1 1/1/15 $ 99,400 $ 7,500 4 Straight-line 2 1/1/15 118,000 10,000 4 Declining-balance 3 1/1/16 82,400 8,000 4 Units-of-activity
For the declining-balance method, the company uses the double-declining rate. For the units-of-activity method, total miles are expected to be 120,000. Actual miles of use in the first 3 years were 2016, 27,000; 2017, 31,500; and 2018, 31,500.

Explanation / Answer

a1) Depreciation per mile = (Original cost-salvage value/total miles expected)

                                     = (82400-8000/120000)

Depreciation per mile = 0.62 per mile

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