Intercity Bus Lines Inc. purchased a bus on January 1, 2011, at a cost of $410,000. The company estimated that the bus will have a residual value of $10,000. The bus is expected to be driven 500,000 km during its 10-year life. The company has a December 31 year end.

Instructions

(a) Calculate the depreciation expense under the straight-line method for 2011 and 2012.

(b) Calculate the depreciation expense under the diminishing-balance method, using double the straight-line rate, for 2011 and 2012.

(c) Calculate the depreciation expense under the units-of-production method, assuming the actual distance driven was 44,800 km for 2011, and 60,300 km for 2012.

(d) Based on this information, which depreciation method should Intercity Bus Lines use? Explain.