Determining the effect of depreciation expense on financial statements
Three different companies each purchased trucks on January 1, 2011, for $40,000. Each truck was expected to last four years or 200,000 miles. Salvage value was estimated to be $5,000. All three trucks were driven 66.000 miles in 2011, 42,000 miles in 2012, 40,000 miles in 2013, and 60,000 miles in 2014. Each of the three companies earned $30,000 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.
Required
Answer each of the following questions. Ignore the effects of income taxes.
a.Which company will report the highest amount of net income for 2011?
b. Which company will report the lowest amount of net income for 2014?
c. Which company will report the highest book value on the December 31, 2013, balance sheet?
d. Which company will report the highest amount of retained earnings on the December 31, 2014, balance sheet?
e. Which company will report the lowest amount of cash flow from operating activities on the 2013 statement of cash flows? j
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