Problem 9-2A In recent years, Avery Transportation purchased three used buses. B

Question

Problem 9-2A 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. Useful Life in Years Salvage Depreciation Bus Acquired Value Method Cost $96, 110,000 000 6,000 10,000 8,000 Straight-line Declining-balance Units-of-activity 92,000 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

Explanation / Answer

For Bus # 2

Useful Life = 4 years

Depreciation Rate = 1/4 =0.25 = 25%

Declining Balance Rate = 2 x 25% = 50%

Cost on 1/1/17 = $110,000

1st year depreciation = 50% of 110,000 = $55,000

Book Value on 1/1/18 = 110,000 - 55,000 =$55,000

2nd year depreciation = 50% of 55,000 = $27,500

Book Value on 1/1/19 = 55,000 - 27,500 =$27,500

3rd year depreciation = 50% of 27,500 = $13,750

Accumulated Depreciation = 1st year + 2nd year + 3rd year Depreciation

Accumulated Depreciation = 55,000 + 27,500 + 13,750

Accumulated Depreciation = $96250

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