Question

6: Operational Assets, Natural Resources, Intan... Saved Help Save & Exit Submit Check my work 4 Part 2 of 5 8.5 Required Information [The following information applies to the questions displayed below.) Three different companies each purchased trucks on January 1, 2018, for $58,000. Each truck was expected to last four years or 250,000 miles. Salvage value was estimated to be $6,000. All three trucks were driven 78,000 miles in 2018, 55,000 miles in 2019,50,000 miles in 2020, and 73,000 miles in 2021. Each of the three companies earned $47,000 of cash revenue during each of the four years. Company A uses straight-line depreciation, company B uses double-declining-balance depreciation, and company C uses units-of-production depreciation. Answer each of the following questions. Ignore the effects of income taxes. points eBook Print References b-1. Calculate the net income for 2021? (Round "Per Unit Cost 3 decimal places.) Net Income $ 34,000 Company A Company B Company CO 10 M Hill Gaw < Prey 4 5 6 7 of 10 Next >

Answer 1

Solution:

Below is the calcualtion of Net Income for 2021

Company A Company B Company C Cash Revenue Depreciation $ 47,000 $ $ 47,000 $ $ 47,000 $ Net Income (Cash Revenue - depreciation) 13,000 $ 34,000 1,250 $ 45,750 15,184 $ 31,816 Working: Depreciation of Company A (Using Staight Line Method) Asset Cost - Salvage Value)/Life of Asset ($58,000 - $6,000)/4 $ 13,000.00 Depreciation of Company B (Using double declining balance) Double Declining Depreciation Rate = (100% / Life of asset) *2 = (100%/4) * 2 = 50% purchase value Less: depreciation 2018 Less: depreciation 2019 Less: depreciation 2020 Less: depreciation 2021 58,000 * 50% (58,000- 29,000) * 50% (29,000 -14,500) * 50% (7,250 - 6,000) 58,000 29,000 14,500 7,250 1,250 Depreciation of Company C (Using Units of Production method) (Asset Cost - Salvage Value) * Miles in 2021/Total Miles ($58,000 - $6,000) * 73,000 / 250,000 $ 15,184.00