Whippet Bus Lines uses the units-of-activity method in depreciating its buses. O
ID: 2566274 • Letter: W
Question
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 $125,000. Over its 4-year useful life, the bus is expected to be driven 220,000 miles. Salvage value is expected to be $8,400.
Prepare a depreciation schedule assuming actual mileage was: 2017, 50,000; 2018, 65,000; 2019, 51,250; and 2020, 33,750. (Round depreciation cost per unit to 3 decimal places, e.g. 0.125 and other answers to 0 decimal places, e.g. 125)
Computation
End of Year
Years
Units of Activity
Depreciation Cost/Unit
Annual Depreciation Expense
Accumulated Depreciation
Book Value
Computation
End of Year
Years
Units of Activity
×Depreciation Cost/Unit
=Annual Depreciation Expense
Accumulated Depreciation
Book Value
2017 $ $ $ $ 2018 2019 2020Explanation / Answer
Solution:
Depreication Cost / Unit (under units of activity method) = (Cost of Asset - Salvage Value) / Estimated driven miles = ($125,000 - 8,400) / 220,000
= $0.53 per unit or per miles
Computation
End of Year
Years
Units of Activity
×
Depreciation Cost/Unit
=
Annual Depreciation Expense
Accumulated Depreciation
Book Value
2017
50000
X
$0.53
=
$26,500.00
26,500
98,500
2018
65000
X
$0.53
=
$34,450.00
$60,950.00
$64,050.00
2019
51250
X
$0.53
=
$27,162.50
$88,112.50
$36,887.50
2020
33,750
X
$0.53
=
$28,487.50
116,600
8400
Computation
End of Year
Years
Units of Activity
×
Depreciation Cost/Unit
=
Annual Depreciation Expense
Accumulated Depreciation
Book Value
2017
50000
X
$0.53
=
$26,500.00
26,500
98,500
2018
65000
X
$0.53
=
$34,450.00
$60,950.00
$64,050.00
2019
51250
X
$0.53
=
$27,162.50
$88,112.50
$36,887.50
2020
33,750
X
$0.53
=
$28,487.50
116,600
8400
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