Question

straight-ling units adicion i Requirements set 4.700 1. Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulated depreciation, and asset book value. 2. Speedway prepares financial statements using the depreciation method that reports the highest net income in the early years of asset use. Consider the first year that Speedway uses the truck. Identify the depreciation method that meets the company's objectives Print Done or enter any number in the input fields and then click Check Answer. Clear All

Answer 1

Straight line Depreciation = (Original Value - Salvage Value) / Useful Life
= ($74700-5100)/5 = $13920

Date	Asset Cost	Depreciable Cost	Useful Life	Depreciation Expense	Acc Dep	Book Value
01-01-2018	$           74,700					$            74,700
12-31-2018		$             69,600	5	$          13,920	$        13,920	$            60,780
12-31-2019		$             55,680	4	$          13,920	$        27,840	$            46,860
12-31-2020		$             41,760	3	$          13,920	$        41,760	$            32,940
12-31-2021		$             27,840	2	$          13,920	$        55,680	$            19,020
12-31-2022		$             13,920	1	$          13,920	$        69,600	$               5,100

Unit of Production Method =(Original Value - Salvage Value) / Total Capacity
= ($ 74700-5100)/92800 = $0.75 per mile

Date	Asset Cost	Depreciation per unit	Number of Units	Depreciation Expense	Acc Dep	Book Value
01-01-2018	$           74,700					$            74,700
12-31-2018		$                  0.75	20000	$          15,000	$        15,000	$            59,700
12-31-2019		$                  0.75	20000	$          15,000	$        30,000	$            44,700
12-31-2020		$                  0.75	20000	$          15,000	$        45,000	$            29,700
12-31-2021		$                  0.75	20000	$          15,000	$        60,000	$            14,700
12-31-2022		$                  0.75	12800	$             9,600	$        69,600	$               5,100

Double Declining Balance method = Beginning Balance x 2 times straight line rate

Date	Asset Cost	Book Value	DDB Rate	Depreciation Expense	Acc Dep	Book Value
01-01-2018	$           74,700					$            74,700
12-31-2018		$             74,700	40%	$          29,880	$        29,880	$            44,820
12-31-2019		$             44,820	40%	$          17,928	$        47,808	$            26,892
12-31-2020		$             26,892	40%	$          10,757	$        58,565	$            16,135
12-31-2021		$             16,135	40%	$             6,454	$        65,019	$               9,681
12-31-2022		$                9,681	40%	$             3,872	$        68,891	$               5,809

2.
Staright line Depreciation should be used as it gives lowest depreciation for 1st year, hence highest net income