Whippet Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January

Question:

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.

Instructions

(a) Compute the depreciation cost per unit.

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

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...