3. In recent years, Diaz transportation purchased three used buses. Because of f

Question

3. In recent years, Diaz transportation purchased three used buses. Because of frequent turnover in accounting department, a different accountant selected the depreciatiorn method for each bus and various methods were selected. Information concerning the buses is summarized below: Bus Acquired Cost Residual Value Useful life in Depreciation method years 1 1/1/2012 $96,000 2 1/1/2012 $140,000 3 1/1/2013 $92,000 $6,000 $10,000 $8,000 Straight-line Declining balance Units of activity 4 For the declining balance method, the company uses the double declining rate. For units of activity method, total miles are expected to be 120,000 miles. Actual miles of use in the first 3 years were 2013: 24,000 miles, 2014: 36,000 miles and 2015: 31,000 miles. Instructions: a. compute the amount of accumulated depreciation on each bus at December 31, 2015? b. If bus no. 1 was purchased on April 1 instead of January 1, what is the depreciation expense for this bus in (1) 2012 and (2) 2013?

Explanation / Answer

a. Bus no.1:

Acc dep for bus 1. on dec 31, 2015= 24000

bus no. 2:

acc dep in 2015 ending= 131250

bus no.3:

Acc dep at 2015 ending= 63700

b. if bus no.1 purchased on April 1:

Straight line method: Depreciatin expense= [Cost- salvage value]/ useful life Cost=                                96,000 Salvage value=                                  6,000 Useful life (in years)=                                           5 Depreciatin expense= [96000-6000]/ 5 18,000 Per year

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