Question

Yelo Bus Lines uses the the bus is expected to be driven 148,500 miles. Salvage value is expected to be $7,500. the End of Year ed Units ot Value Year Activity x Cost /Unit Expense 2019 Yelo Bus Lines uses the the bus is expected to be driven 148,500 miles. Salvage value is expected to be $7,500. the End of Year ed Units ot Value Year Activity x Cost /Unit Expense 2019

Answer 1

1. Depreciation cost per unit= (Initial cost-salvage value)/Total Estimated miles

                =( $ 245,100-$ 7500)148500 miles=$ 1.6/mile

                Therefore Yello’s Depreciation cost per unit=$ 1.6/mile

2. Preparation of Depreciation Schedule

	Computation                                                                       End of Year
Year	Units of Activity	X	Depreciation Cost per unit	=	Annual Depreciation Expense	Accumulated Depreciation	Book Value
2019	35,500	X	$ 1.6/mile	=	$ 56,800	$ 56,800	$ 188,300
2020	58,000	X	$ 1.6/mile	=	$ 92,800	$ 149,600	$ 95,500
2021	33,000	X	$ 1.6/mile	=	$ 52,800	$ 202400	$ 42700
2022	22,000	X	$ 1.6/mile	=	$ 35200	$ 237,600	$ 7500

Note:

1. Annual depreciation expense=Units of activity*Depreciation cost per unit

Accumulated Depreciation=Current year depreciation+ Prior year’s accumulated depreciation

Book value of asset=Previous year’s book value-current year’s depreciation expense

2. Year 2019

Annual depreciation expense=35,500 miles*$ 1.6/mile=$ 56,800

Accumulated Depreciation=$ 56,800+$ 0=$ 56,800

Book value of asset=$ 245,100-$ 56,800=$ 188,300

Year 2020

Annual depreciation expense=58,000 miles*$ 1.6/mile=$ 92,800

Accumulated Depreciation=$ 92,800+$ 56,800=$ 149,600

Book value of asset=$ 188,300-$ 92800=$ 95,500

Year 2021

Annual depreciation expense=33000 miles*$ 1.6/mile=$ 52,800

Accumulated Depreciation=$ 52,800+$ 149,600=$ 202400

Book value of asset=$ 95500-$ 52800= $ 42700

Year 2022

Annual depreciation expense=22000 miles*$1.6/mile=$ 35200

Accumulated Depreciation=$202400+$35200=$ 237,600

Book value of asset=$ 42700-$ 35200=$ 7500