Question

the assets were placed in service on October 1 rion expense for the year ended December 31. Round to At Determine the total rtial-year depreciation es All construct Record partial- the nearest dollar Determining asset cost, d identifying depreciati P10-314 Deter On January 3, 2018, Rar ng the truck in service, Rapids overhauling the engine. The ast, preparing depreciation schedules (3 methode preciation results that meet management objectives Learning Delivery Service purchased a truck at a cost of $100.000, 1 Unitsota rvice, Rapid spent $3,000 painting it, $600 replacing tires, бер top gine. The truck should remain in service for five years $12.000. The truck's annual mileage is expected to be first four years and 8,000 miles in the fifth year-136.000 ch depreciation method to use, Andy Sargeant, the gen- eciation schedule for each of the depreciation methods on, and double-declining-balance). Before placing the and $10,400 overh and have a reside 32,000 miles in miles in total. In a residual value of $12,000 miles in each of the first to total. In deciding which deprec manager, requests a depreciati line, units-of-production, and doub enul mana (straight-line, uni Requirements depreciation schedule for each depreciat for each depreciation method, showing asset cost, 1. Prepare a depreciari depreciation expense, accumu e accumulated depreciation, and asset book value. financial statements using the depreciation method in the early years of asset use. Consider the first year that ruck. Identify the depreciation method that meets the no the depreciation method that reports 2. Rapid prepares financi the highest net income in the Rapid uses the truck. Identi objectives

Answer 1

Straight Line
Date	Cost of asset	Depreciable cost	Useful life	Depreciation expenses	Accumulated Depreciation	Book value
Year 1	$1,14,000	$1,02,000	5 Years	$20,400	$20,400	$93,600
Year 2	$1,14,000	$1,02,000	5 Years	$20,400	$40,800	$73,200
Year 3	$1,14,000	$1,02,000	5 Years	$20,400	$61,200	$52,800
Year 4	$1,14,000	$1,02,000	5 Years	$20,400	$81,600	$32,400
Year 5	$1,14,000	$1,02,000	5 Years	$20,400	$1,02,000	$12,000
Units of production
Date	Cost of asset	Depreciation per miles	No. of miles	Depreciation expenses	Accumulated Depreciation	Book value
Year 1	$1,14,000	$0.75	32000	$24,000	$24,000	$90,000
Year 2	$1,14,000	$0.75	32000	$24,000	$48,000	$66,000
Year 3	$1,14,000	$0.75	32000	$24,000	$72,000	$42,000
Year 4	$1,14,000	$0.75	32000	$24,000	$96,000	$18,000
Year 5	$1,14,000	$0.75	8000	$6,000	$1,02,000	$12,000
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
Year 1	$1,14,000	$96,000	40.00%	$38,400	$38,400	$75,600
Year 2	$1,14,000	$75,600	40.00%	$30,240	$68,640	$45,360
Year 3	$1,14,000	$45,360	40.00%	$18,144	$86,784	$27,216
Year 4	$1,14,000	$27,216	40.00%	$10,886	$97,670	$16,330
Year 5	$1,14,000	$16,330	40.00%	$6,532	$1,04,202	$9,798
As we can see that from the above calculations that in the early years of assets use the Depreciation expenses in straight-line method is the least and hence under
straight-line method the Net Income will be higher as compared to other 2 methods