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 $100,000. Over its 4-year useful life, the bus is expected to be driven 160,000 miles. Salvage value is expected to be $8,000.

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, 40,000; 2018, 52,000; 2019, 41,000; and 2020, 27,000. (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

Instructions are listed below.

Explanation:

Giving the following information:

Whippet Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2017, for $100,000. Over its 4-year useful life, the bus is expected to be driven 160,000 miles. Salvage value is expected to be $8,000.

Compute the depreciation cost per unit.

Depreciation per unit = (100,000 - 8,000) / 160,000 = $0.575 per mile.

Prepare a depreciation schedule assuming actual mileage was: 2017, 40,000; 2018, 52,000; 2019, 41,000; and 2020, 27,000.

Annual depreciation = [ (original cost - salvage value) / useful life of production in units]*units produced

2017 = 0.575*40,000 = 23,000

2018 = 0.575*52,000 = 29,900

2019 = 0.575*41,000 = 23,575

2020 = 0.575*27,000 = 15,525