Exercise 9-1 Whippet Bus Lines uses the units-of-activity method in depreciating

Question

Exercise 9-1 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 $127,000. Over its 4-year useful life, the bus is expected to be driven 216,000 miles. Salvage value is expected to be $8,200 nswer is incorrect. Try again. Your a Compute the depreciation cost per unit. (Round answer to 3 decimal places, e.g. 6.251) Depreciation cost per unit LINK TO TEXT Your answer is incorrect. T ry again. Prepare a depreciation schedule assuming actual mileage was: 2017, 50,800; 2018, 66,040; 2019, 52,070; and 2020, 34,290. (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 Units of Activity Depreciation Cost/Unit Annual Depreciation Expense Accumulated Depreciation Book Value Years 2017 2018 2019 2020

Explanation / Answer

Depreciation cost per unit = (Purchase price - Salvage value)/ Expected driven miles

= ($127000 - $8200) / 216000 = $0.55

Depreciation schedule

Depreciation in the last year is matched with actual activity. Hence the new rate is calculated as $0.755. This is done to reach at the salvage value of $8200.

Years Computation = Annual Depreciation
Expense End of Year Units of
Activity x Dep
cost/unit Accumulated
Depreciation Book
Value 2017 50800 x $0.55 = $27940 $27940 $99060 2018 66040 x $0.55 = 36322 64262 62738 2019 52070 x $0.55 = 28639 92901 34099 2020 34290 x $0.755* = 25899* 118800 8200

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