Question

In recent years, Novak Transportation purchased three used b e cause 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 summarized as follows. Bus Cost Useful Life in Years Depreciation Method Acquired 1/1/18 1/1/18 1/1/19 $99,000 110,000 89,000 Salvage Value $5,500 10,500 8,500 Straight-line Declining balance Units of activity 4 For the declining balance method, the company uses the double declining rate for the units of activity method, totalmiles are expected to be 115.000. Actualmiles of use in the first years were 2019, 23,000; 2020, 31,000; and 2021, 30,500.

Answer 1

Correct Answer:

1: Straight line method:

Straight line Method
A	Cost	$     99,000.00
B	Residual Value	$       5,500.00
C=A - B	Depreciable base	$     93,500.00
D	Life [in years left ]	5
E=C/D	Annual SLM depreciation	$     18,700.00

Year	Book Value	Depreciation expense	Ending Book Value	Accumulated Depreciation
2017	$          99,000.00	$     18,700.00	$           80,300.00	$      18,700.00
2018	$          80,300.00	$     18,700.00	$           61,600.00	$      37,400.00
2019	$          61,600.00	$     18,700.00	$           42,900.00	$      56,100.00
2020	$          42,900.00	$     18,700.00	$           24,200.00	$      74,800.00
2021	$          24,200.00	$     18,700.00	$              5,500.00	$      93,500.00

2: Double-Declining method:

Double declining Method
A	Cost	$ 1,10,000.00
B	Residual Value	$     10,500.00
C=A - B		$     99,500.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$     24,875.00
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$            1,10,000	50.00%	$                 55,350	$            54,650	$                     55,350
2	$                54,650	50.00%	$                 27,325	$            27,325	$                     82,675
3	$          27,325.00	50.00%	$           13,662.50	$      13,662.50	$               96,337.50
4	$          13,662.50	(13662.50 - 10500)	$              3,162.50	$      10,500.00	$                     99,500

3 :Units of Activity:

Units of Activity method
A	Cost	$     89,000.00
B	Residual Value	$       8,500.00
C=A - B	Depreciable base	$     80,500.00
D	Usage in units(in Miles)	115000
E	Depreciation per Mile	$                0.70

Year	Book Value	Usage	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$          89,000.00	23000	$           16,100.00	$      72,900.00	$               16,100.00
2	$          72,900.00	31000	$           21,700.00	$      51,200.00	$               37,800.00
3	$          51,200.00	30500	$           21,350.00	$      29,850.00	$               59,150.00
4	$          29,850.00	30500	$           21,350.00	$        8,500.00	$               80,500.00

End of answer.

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