Question

Compute depreciation under different methods. (LO ) P10-2A In recent years, Avery Transportation purchased three used buses. Because of frequent turnover in the accounting department, a different accountant selected the depre- ciation method for each bus, and various methods were selected. Information concerning the buses is summarized as follows. Bus Acquired 1 1/1/15 1/1/15 1/1/16 TOTE Cost $ 96,000 110,000 92,000 Salvage Useful Life Value in Years $ 6,000 5 10,000 8,000 5 Depreciation Method Straight-line Declining balance Units-of-activity 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 2016, 24,000; 2017, 34,000; and 2018, 30,000. Instructions (a) Compute the amount of accumulated depreciation on each bus at December 31, 2017. (b) If Bus 2 was purchased on April 1 instead of January 1, what is the depreciation expense for this bus in (1) 2015 and (2) 2016? (a) Bus 2, 2016, 582,500

Answer 1

1)	Depreciation expense per mile
	(92000-8000)/120,000
	0.7	per mile
	BUS 1
	(96000-6000)/5
	18000
	Accumulated depreciation
	18000*3=	54000
	BUS 2
	Rate = 1/4*2=		0.5	or 50%
				Accumul	book
	year		Dep	dep	value
	2015	110,000	55000	55000	55,000
	2016	55,000	27500	82500	27,500
	2017	27,500	13750	96250	13,750
	BUS 3
	year	units	rate	Dep
	2016	24,000	0.7	16800
	2017	34,000	0.7	23800
				40600
		Accumulated Depreciation
	BUS 1	54000
	BUS 2	96250
	BUS 3	40600
b)	year		Dep	dep	value
	2015	110,000	41250	41250	68,750
	2016	68,750	34375	75625	34,375
	dep for 2015 will be 110000*50%*9/12
				2015	2016
	Depreciation expense			41,250	34,375