Question

Whippet Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2017, at a cost of $145,000. Over its 4-year useful life, the bus is expected to be driven 245,000 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

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Prepare a depreciation schedule assuming actual mileage was: 2017, 58,000; 2018, 75,400; 2019, 59,450; and 2020, 39,150. (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
2017				$		$		$		$
2018
2019
2020

Answer 1

Answers

• Requirement 1
  Depreciation cost per unit = ($145000 – 7800) / 245000 miles
  = $ 0.560 per mile
• Requirement 2

	Computation							End of Year
Years		Units of Activity	×	Depreciation Cost/Unit	=	Annual Depreciation Expense		Accumulated Depreciation		Book Value
2017		$58,000		$0.560		$32,480		$32,480		$112,520
2018		$75,400		$0.560		$42,224		$74,704		$70,296
2019		$59,450		$0.560		$33,292		$107,996		$37,004
2020		$39,150		$0.560		$21,924		$129,920		$15,080
S						$129,920