Ariels Adventures Limited purchased a bus on January 1, 2023 to use for providing tours for their
Question:
Ariel’s Adventures Limited purchased a bus on January 1, 2023 to use for providing tours for their customers. The bus cost $125,000 and Eric, the company manager, feels that it has a useful life of 5 years or 400,000 km. Eric also feels that they will be able to sell the bus for $25,000 at the end of the 5 years.
Ms. Flounder, the new bookkeeper, is not sure which method of depreciation to use and has come to you for assistance. Ariel’s Adventures Limited has a December 31 year end and records depreciation on its property, plant & equipment at December 31 each year.
Required:
1. Calculate the depreciation for Ariel’s Adventures Limited for 2023, 2024, 2025, 2026 & 2027 using the following methods:
a. Straight-line
b. Double-diminishing balance
c. Units-of-production (assuming bus was driven 75, 000km in 2023, 90,000km in 2024, 100,000 km in 2025, 80,000 km in 2026 and 70,000 km in 2027
2. Which method of depreciation should management choose & why?
3. Assume the company chooses to use straight-line depreciation & then sells the bus for $30,000 on January 1, 2028. Prepare the journal entry to record the sale of the bus.
Calculus For Scientists And Engineers Early Transcendentals
ISBN: 9780321849212
1st Edition
Authors: William L Briggs, Bernard Gillett, Bill L Briggs, Lyle Cochran