Question

E9-5 Copacabana Bus Lines uses the units-of-activity method in depreciating its buses. Compute depreciation under One bus was purchased on January 1, 2017, at a cost of R$145,000. Over its 4-year useful units of activity method. life, the bus is expected to be driven 100,000 miles. Residual value is expected to be (LO 2) R$15,000. Instructions (a) Compute the depreciable cost per unit. (6) Prepare a depreciation schedule assuming actual mileage was 2017, 27,000; 2018, 32,000; 2019, 24,000; and 2020, 17,000.

Answer 1

Solution a:

Depreciation cost per unit = (Cost - Residual value) / Useful life in miles = ($145,000 - $15,000) / 100000 = $1.30 per mile

Solution b:

Depreication Schedule - Unit of Production method
Year	Asset Cost	Depreciation per mile	Nos of miles driven	Depreciation Expense for the year	Accumulated Depreciation	Ending Book Value
Purchase Date	$145,000.00
2017		$1.30	27000	$35,100.00	$35,100.00	$109,900.00
2018		$1.30	32000	$41,600.00	$76,700.00	$68,300.00
2019		$1.30	24000	$31,200.00	$107,900.00	$37,100.00
2020		$1.30	17000	$22,100.00	$130,000.00	$15,000.00
Total				$130,000.00