Question

Compule 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 Cost $ 96,000 110,000 92,000 Salvage Useful Life Value in Years $ 6,000 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. (a) Bus 2, 2016, 582,500 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?

Answer 1

a) Compute accumlated depreciation on each bus :

BUS 1 = (96000-6000/5)*3 = 54000

BUS 2 :

Straight line rate = 100/4 = 25%; Double decline rate = 25*2 = 50%

2015 dep = 110000*50%=55000;2016 dep = 55000*50% = 27500; 2017 dep = 27500*50%=13750

Accumlated dep on december 31, 2017 = (55000+27500+13750) = 96250

BUS 3 : (92000-8000/120000) = 0.7 per miles

Accumlated dep = (24000+34000)*.70 = 40600

(b) 2015 Expenses = 110000*50%*9/12 = 41250

2016 Expenses = (110000*50%*3/12+55000*50%*9/12) = 34375