Question

Exercise 9-05 a-b Yello Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2020, at a cost of $148,000. Over its 4-year useful life, the bus is expected to be driven 100,000 miles. Salvage value is expected to be $8,000. Your answer is correct. Compute the depreciable cost per unit. (Round answer to 2 decimal places, e.g. 0.50.) Depreciation cost per unit per mile

Answer 1

Requirement 1:

Depreciation cost per unit = [(Cost - Salvage value)/ total units

= [($148,000-$8,000)/100,000 miles]

= $140,000/100,000 miles

= $1.4 per mile

Requirement 2:

Computation						End of Year
Year	Units of Activity	x	Depreciation Cost/Unit	=	Annual Depreciation Expense	Accumulated Depreciation	Book Value
2020	26,000	x	$1.40	=	$36,400	$36,400	$111,600
2021	32,000	x	$1.40	=	$44,800	$81,200	$66,800
2022	25,000	x	$1.40	=	$35,000	$116,200	$31,800
2023	17,000	x	$1.40	=	$23,800	$140,000	$8,000

Accumulated Depreciation:

For 2020 = Depreciation expense for 2020

For remaining years = Previous year accumulated depreciation + Current year depreciation expense

Book Value:

Book value = $148,000 cost - Accumulated Depreciation