BagODonuts Company thought a used delivery truck on January 1, 2010, for 19,200.

Question

BagODonuts Company thought a used delivery truck on January 1, 2010, for 19,200. The van was expected to remain in service 4 years (30,000 miles). BagODonuts' accountant estimated that the truck's residual value would be $2,400 at the end of its useful life. The truck traveled 8,000 miles the first year, 8,500 miles the second year, 5,500 miles the third year, and 8,000 miles in the fourth year.

1. Calculate depricaiation expense for the truck for each year (2010-2013) using the:

a. Straight-line method.

b. Double-declining balance method.

c. Units of Production method.

(For units-of production and double-declining balance, round to the nearest two decimals after each step of the calculation.)

2. Which method best tracks the wear and tear on the van?

3. Which method would BagODonuts prefer to use for income tax purposes? Explain in detail why BagODonuts prefers this method.

Explanation / Answer

a) Straightline method (depreciation)= (Purchase Price of Asset - Approximate Salvage Value)

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.