Compute depreciation under different methods LO 2) In recent years, Avery Transp

Question

Compute depreciation under different methods LO 2) 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 shown as follows. Bus Acquired Cost $ 96,000 110,000 92,000 Salvage Value $ 6,000 10,000 8,000 Useful Life in Years Depreciation Method Straight-line Declining-balance Units-of-activity 2 4 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 2018, 24,000; 2019, 34,000; and 2020, 30,000 Instructions (a) Compute the amount of accumulated depreciation on each bus at December 31,2019 Bus 2, 2018, $82,500 If Bus 2 was purchased on April 1 instead of January 1, what is the depreciation expense for this bus in (1) 2017 and (2) 2018? (b)

Explanation / Answer

Bus Acquistion Date Cost Salvage Life Method 1 01.01.17 96000 6000 5 SLM 2 01.01.17 110000 10000 4 Declining 3 01.01.18 92000 8000 5 Units Unit of Activity 2016 24000 2017 34000 Total Activity 120000 2018 30000 Working Note: Purchase Cost 92000 Less: Salvage Cost 8000 Depreciable Value 84000 Total Activity 120000 Expense per Mile 0.70 A2 Accumulated Depreciation as at 31-12-2019: Bus Accumulated Dep Bus Cost Salvage Life 1 54000 (WN on Right Side) 1 96000 6000 5 2 96250 (WN on Right Side) 2 110000 10000 4 3 40600 (24000+34000)*0.70 3 92000 8000 5 B Purchase of Bus 2 on April 1: Bus 1 Acquistion Date 01.01.17 Year 2017 Beginning Value 110000 Cost 96000 Depreciation 41250 (110000*50%*9/12) Salvage 6000 Depreciable Value 90000 Year 2018 Useful Life 5 Years Beginning Value 68750 (110000-41250) Depreciation PA 18000 3 54000 Depreciation 34375 (68750*50%) Bus 2 2017 2018 Acquistion Date 01.01.17 Depreciation 41250 34375 Rate of Depreciation 1/Life 25.00% Double D Rate 50% Year 2017 Beginning Value 110000 Depreciation 55000 (110000*50%) Year 2018 Beginning Value 55000 (110000-55000) Depreciation 27500 Year 2019 Beginning Value 27500 Depreciation 13750

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