In recent years, Avery Transportation purchased three used buses. Because of frequent turnover in the accounting department, a different accountant selected the depreciation method for each bus, and various methods were selected.

In recent years, Avery Transportation purchased three used buses. Because of frequent turnover in the accounting department, a different accountant selected the depreciation method for each bus, and various methods were selected. Information concerning the buses is shown as follows.

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 2018, 24,000; 2019, 34,000; and 2020, 30,000.
For Bus #3, calculate depreciation expense per mile under units-of-activity method.

Depreciation expense = $84,000 ÷ 120,000 miles = $0.7 per mile.

Compute the amount of accumulated depreciation on each bus at December 31, 2019.




Explanation

Year		Computation		Accumulated Depreciation 12/31
		BUS 1
2015		$ 90,000 × 20% = $18,000		$18,000
2018		$ 90,000 × 20% = $18,000		36,000
2019		$ 90,000 × 20% = $18,000		54,000
		BUS 2
2015		$110,000 × 50% = $55,000		$55,000
2018		$ 55,000 × 50% = $27,500		82,500
2019		$ 27,500 × 50% = $13,750		96,250
		BUS 3
2018		24,000 miles × $0.7* = $16,800		$16,800
2019		34,000 miles × $0.7 = $23,800		40,600

*$84,000 ÷ 120,000 miles = $0.7 per mile.

If Bus 2 was purchased on April 1 instead of January 1, what is the depreciation expense for this bus in (1) 2017 and (2) 2018?

Explanation

Computation BUS 2		Expense
(1)		2017		$110,000 × 50% x 9/12		$41,250
(2)		2018		$68,750 × 50%		$34,375

(DDB ann. depr. = BV at beg. of ea. Yr. x DDB rate); (2017 depr. exp. = $110,000 x (2 x 1/4) x 9/12)
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