Question

Blossom Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2022, at a cost of $117,000. Over its 4-year useful life, the bus is expected to be driven 210,000 miles. Salvage value is expected to be $7,800.

Compute the depreciation cost per unit. (Round answer to 3 decimal places, e.g. 6.251)

Depreciation cost per unit

$enter the depreciation cost per unit in dollars rounded to 3 decimal places

Prepare a depreciation schedule assuming actual mileage was: 2022, 46,800; 2023, 60,000; 2024, 47,000; and 2025, 56,200. (Round depreciation cost per unit to 3 decimal places, e.g. 0.125 and other answers to 0 decimal places, e.g. 125)

	Computation							End of Year
Years		Units of Activity	×	Depreciation Cost/Unit	=	Annual Depreciation Expense		Accumulated Depreciation		Book Value
2022		enter units of activity in miles rounded to 0 decimal places		$enter depreciation costs per unit in dollars rounded to 3 decimal places		$enter annual depreciation expenses in dollars rounded to 0 decimal places		$enter end-of-year accumulated depreciation in dollars rounded to 0 decimal places		$enter end-of-year book value in dollars rounded to 0 decimal places
2023		enter units of activity in miles rounded to 0 decimal places		enter depreciation costs per unit in dollars rounded to 3 decimal places		enter annual depreciation expenses in dollars rounded to 0 decimal places		enter end-of-year accumulated depreciation in dollars rounded to 0 decimal places		enter end-of-year book value in dollars rounded to 0 decimal places
2024		enter units of activity in miles rounded to 0 decimal places		enter depreciation costs per unit in dollars rounded to 3 decimal places		enter annual depreciation expenses in dollars rounded to 0 decimal places		enter end-of-year accumulated depreciation in dollars rounded to 0 decimal places		enter end-of-year book value in dollars rounded to 0 decimal places
2025		enter units of activity in miles rounded to 0 decimal places		enter depreciation costs per unit in dollars rounded to 3 decimal places		enter annual depreciation expenses in dollars rounded to 0 decimal places		enter end-of-year accumulated depreciation in dollars rounded to 0 decimal places		enter end-of-year book value in dollars rounded to 0 decimal places

Answer 1

(a)

Depreciation cost per unit = (Initial cost - salvage value) / unit activity

= ($117000 - $7800)/210000 = $0.52 per unit

(b)

Year	unit of activity	depreciation cost per unit	depreciation per annum	accumulated depreciation	book value
2022	46800	$0.52	$24336	$24336	$92664
2023	60000	$0.52	$31200	$55536	$61464
2024	47000	$0.52	$24440	$79976	$37024
2025	56200	$0.52	$29224	$109200	$7800