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 $146,000. Over its 4-year useful life, the bus is expected to be driven 246,250 miles. Salvage value is expected to be $8,100. Compute the depreciation cost per unit. (Round answer to 3 decimal places, e.g. 6.251) Depreciation cost per unit $ LINK TO TEXT VIDEO: APPLIED SKILLS Prepare a depreciation schedule assuming actual mileage was: 2017, 58,400; 2018, 75,920; 2019, 59,860; and 2020, 39,420. (Round depreciation cost per unit to 3 decimal places, e.g. O.125 and other answers to 0 decimal places, e.g. 125) Computation End of Year Years Units of Activity x Depreciation Cost/Unit = Annual Depreciation Expense Accumulated Depreciation Book Value 2017 2018 2019 2020

Explanation / Answer

Cost of bus = $146,000

Salvage value = $8,100

Expected miles for the entire life = 246,250 miles

Depreciation cost per unit = (Cost of bus - Salvage value) ÷ Expected miles for the entire life = (146,000-8,100)÷246,250 = 137,900÷246,250 = 0.560 per unit

Book value = Cost of bus - Accumulated depreciation

Year Units of Activity × Depreciation Cost/Unit = Annual Depreciation Expense Accumulated Depreciation Book value 2017 58,400 $0.560 $32,704 $32,704 $113,296 2018 75,920 0.560 42,515.20 75,219.20 70,780.80 2019 59,860 0.560 33,521.60 108,740.80 37,259.20 2020 39,420 0.560 22,075.20 130,816 15,184

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