Sunland Arrow Ltd. purchased a new bus on October 1, 2024, at a total cost of $185,590. Management is considering the merits of using the diminishing-balance or units-of-production methods of depreciation instead of the straight-line method, which it currently uses for its other buses. The new bus has an estimated residual value of $18,500, and an estimated useful life of either four years or 303,800 km. Use of the bus will be sporadic so it could be much higher in some years than in others. Assume the new bus is driven as follows: 8,200 km in 2024; 99,000 km in 2025; 64,300 km in 2026; 97,000 km in 2027; and 35,300 km in 2028. Sunland Arrow has a October 31 year end. (a) Prepare separate depreciation schedules for the life of the bus using: (Round depreciation per unit to 2 decimal places, e.g. 5.28 and final answers to O decimal places, e.g. 5,275.) (1) Straight-line method: Year 2024 $ 2025 2026 2027 2028 Depreciable Amount +A $ Depreciation Expense 19 $ Accumulated Depreciation $ Carrying Amount

Sunland Arrow Ltd. purchased a new bus on October 1, 2024, at a total cost of $185,590. Management is considering the merits of using the diminishing-balance or units-of-production methods of depreciation instead of the straight-line method, which it currently uses for its other buses. The new bus has an estimated residual value of $18,500, and an estimated useful life of either four years or 303,800 km. Use of the bus will be sporadic so it could be much higher in some years than in others. Assume the new bus is driven as follows: 8,200 km in 2024; 99,000 km in 2025; 64,300 km in 2026; 97,000 km in 2027; and 35,300 km in 2028. Sunland Arrow has a October 31 year end. (a) Prepare separate depreciation schedules for the life of the bus using: (Round depreciation per unit to 2 decimal places, e.g. 5.28 and final answers to O decimal places, e.g. 5,275.) (1) Straight-line method: Year 2024 $ 2025 2026 2027 2028 Depreciable Amount +A $ Depreciation Expense 19 $ Accumulated Depreciation $ Carrying Amount

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 13PA: Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value...

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Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.
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