Question

Delivery Service Express (DSE) has a fleet of trucks and specializes in the delivery of refrigerated foods. The warehouse manager a delivery truck for $240,000. Part of the job of the Chief Financial Office estimated useful life. The CFO is considering three depreciation methods: activity-based, straight-line, and double-declining-balance. The CFO has plotted depreciation each year (left graph) using an estimated five-year useful life. The right graph shows the accumulation of depreciation each year for each method. Depreciation Each Year by Method Accumulated Depreciation Each Year by Method $120,000 $250,000 $100,000 $200,000 $200,000 $80,000 $150,000 Method 1 $60,000 $100,000 Method 2 Method 3 $40,000 $20,000 --Method 1 Method 2 Method 3 $50,000 $0 $0 Year 1 2 3 4 5 Year1 2 3 4 5 Click here to open the graph(s) in a new tab. Required: Complete this question by entering your answers in the tabs below. Req 1 Reg1 Req 2A Reg za Req 2B Reg 28 Reg 3 Req3 Reg 4 Reg 4 Req 5A Reqsa Req 5B Req se Which method is depicted by each option: Method 1: Method 2: Method 3: < Reqi Req 2A >

Answer 1

1)

Method1: Straight line (since the amount of depreciation fixed every year)

Method 2: Double declining balance(since the amount of depreciation decreasing year by year)

Method 3: Activity based

2A)Activity based , as this value is more in graph than others for year 2

2B)Straight line

3)They are all equal, we can see in graph 2 last year

4) Using any depreciation method: Residual value= Amount-accumulated depreciation

=240000-200000=$40,000

5A) Book value= purchase price-accumulated depreciation

=240000-80000=$160,000

5b) Book value= purchase price-accumulated depreciation

=240000-153600=$86,400