P1-8A In recent years, Waterfront 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 summarized below.
Salvage Useful life
Bus. Aquired Cost Value in years Depreciation meathod
1 1/1/00 $86,000 $6,000 4 straight-line
2 1/1/00 $140,000 10,000 5 Declining balance
3 1/1/01 $ 80,000 8,000 5 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 120,000. Actual miles of use in the first 3 years were: 2001, 24,000; 2002, 34,000; and 2003, 30,000.
(a) Compute the amount of accumulated depreciation on each bus at December 31, 2002.
(b) If bus no. 2 was purchased on April 1 instead of January 1, what is the depreciation expense for this bus in (1) 2000 and (2) 2001?
The solution explains the calculation of various depreciation methods- straight line, declining balance and units of activity method.