Bus Acquired Cost Salvage Value Useful Life in Years
1 1/1/13 $98,100 8,000 5 (straight-line)
2 1/1/13 129,000 11,900 5 (decline balance)
3 1/1/14 79,780 8,200 4 (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 119,300. Actual miles of use in the first 3 years were: 2014, 24,400; 2015, 31,900; and 2016, 29,700.
Depreciation Expense: .60 per mile
Compute the amount of accumulated depreciation on each bus at December 31, 2015.
Please help thank you!
To calculate the amount of accumulated depreciation on each bus at December 31, 2015, we need to calculate the depreciation expense for each bus up to that date using the given information.
1) Straight-Line Method for Bus 1:
The cost of Bus 1 is $98,100. The salvage value is $8,000, and the useful life is 5 years.
Depreciation Expense per Year = (Cost - Salvage Value) / Useful Life
Depreciation Expense per Year = ($98,100 - $8,000) / 5
Depreciation Expense per Year = $90,100 / 5
Depreciation Expense per Year = $18,020
Accumulated Depreciation at December 31, 2015 = Depreciation Expense per Year x Number of Years
Accumulated Depreciation at December 31, 2015 = $18,020 x 3 (for 2013, 2014, and 2015)
Accumulated Depreciation at December 31, 2015 = $54,060
The accumulated depreciation for Bus 1 at December 31, 2015, is $54,060.
2) Declining Balance Method for Bus 2:
The cost of Bus 2 is $129,000. The salvage value is $11,900, and the useful life is 5 years.
Double-Declining Rate = 2 / Useful Life
Double-Declining Rate = 2 / 5
Double-Declining Rate = 0.4 or 40%
Depreciation Expense for Year 1 = Book Value at Beginning of Year x Double-Declining Rate
Depreciation Expense for Year 1 = ($129,000 - $0) x 0.4
Depreciation Expense for Year 1 = $51,600
Depreciation Expense for Year 2 = Book Value at Beginning of Year x Double-Declining Rate
Depreciation Expense for Year 2 = ($129,000 - $51,600) x 0.4
Depreciation Expense for Year 2 = $77,760
Accumulated Depreciation at December 31, 2015 = Depreciation Expense for Year 1 + Depreciation Expense for Year 2
Accumulated Depreciation at December 31, 2015 = $51,600 + $77,760
Accumulated Depreciation at December 31, 2015 = $129,360
The accumulated depreciation for Bus 2 at December 31, 2015, is $129,360.
3) Units-of-Activity Method for Bus 3:
The cost of Bus 3 is $79,780. The salvage value is $8,200, and the useful life is 4 years.
Total Miles Expected = 119,300
Miles Used in 2014 = 24,400
Miles Used in 2015 = 31,900
Miles Used in 2016 = 29,700
Total Miles Used in First 3 Years = Miles Used in 2014 + Miles Used in 2015 + Miles Used in 2016
Total Miles Used in First 3 Years = 24,400 + 31,900 + 29,700
Total Miles Used in First 3 Years = 85,000
Depreciation Expense per Mile = (Cost - Salvage Value) / Total Miles Expected
Depreciation Expense per Mile = ($79,780 - $8,200) / 119,300
Depreciation Expense per Mile = $71,580 / 119,300
Depreciation Expense per Mile = $0.5997 or $0.60 (rounded to 2 decimal places)
Accumulated Depreciation at December 31, 2015 = Depreciation Expense per Mile x Total Miles Used in First 3 Years
Accumulated Depreciation at December 31, 2015 = $0.60 x 85,000
Accumulated Depreciation at December 31, 2015 = $51,000
The accumulated depreciation for Bus 3 at December 31, 2015, is $51,000.
Therefore, the amount of accumulated depreciation on each bus at December 31, 2015, is:
- Bus 1: $54,060
- Bus 2: $129,360
- Bus 3: $51,000
To compute the amount of accumulated depreciation on each bus at December 31, 2015, we need to follow different methods for each bus as specified in the information provided.
Let's start with Bus 1:
Bus 1 is using the straight-line method, which means the depreciation expense will be evenly allocated over the useful life of the asset.
Step 1: Calculate the annual depreciation expense for Bus 1.
Depreciation Expense = (Acquisition Cost - Salvage Value) / Useful Life
Depreciation Expense = ($98,100 - $8,000) / 5 = $18,620
Step 2: Calculate the accumulated depreciation for Bus 1 at December 31, 2015.
Accumulated Depreciation = Depreciation Expense * Number of Years
Accumulated Depreciation = $18,620 * 2 (as it is the end of the second year)
Accumulated Depreciation for Bus 1 at December 31, 2015 = $37,240
Moving on to Bus 2:
Bus 2 is using the declining-balance method with the double-declining rate. This method applies a higher depreciation rate to the book value of the asset each year.
Step 1: Calculate the depreciation rate.
Depreciation Rate = 2 * (100% / Useful Life) = 2 * (100% / 5) = 40%
Step 2: Calculate the annual depreciation expense for Bus 2 using the declining-balance method.
Depreciation Expense = Book Value * Depreciation Rate
Depreciation Expense = (Acquisition Cost - Accumulated Depreciation) * Depreciation Rate
Depreciation Expense = ($129,000 - 0) * 40% = $51,600
Step 3: Calculate the accumulated depreciation for Bus 2 at December 31, 2015.
Accumulated Depreciation = Depreciation Expense * Number of Years
Accumulated Depreciation = $51,600 * 2 (as it is the end of the second year)
Accumulated Depreciation for Bus 2 at December 31, 2015 = $103,200
Now let's move on to Bus 3:
Bus 3 is using the units-of-activity method, which means the depreciation expense is based on the actual usage (in miles) of the asset.
Step 1: Calculate the depreciation expense per mile.
Depreciation Expense per Mile = Depreciation Expense / Total Expected Miles
Depreciation Expense per Mile = ($79,780 - $8,200) / 119,300 = $0.599 per mile
Step 2: Calculate the accumulated depreciation for Bus 3 at December 31, 2015, based on the actual miles used.
Accumulated Depreciation = Depreciation Expense per Mile * Actual Miles Used
Accumulated Depreciation = $0.599 per mile * (24,400 + 31,900)
Accumulated Depreciation for Bus 3 at December 31, 2015 = $0.599 per mile * 56,300 = $33,769
To summarize, the amount of accumulated depreciation on each bus at December 31, 2015, is as follows:
- Bus 1: $37,240
- Bus 2: $103,200
- Bus 3: $33,769