Question

On January 2​, 2018​, Nimble Delivery Service purchased a truck at a cost of $ 95 comma 000. Before placing the truck in​ service, Nimble spent $ 4 comma 000 painting​ it, $ 2 comma 500 replacing​ tires, and $ 7 comma 500 overhauling the engine. The truck should remain in service for five years and have a residual value of $ 10 comma 000. The​ truck's annual mileage is expected to be 26 comma 000 miles in each of the first four years and 19 comma 750 miles in the fifth yearlong dash123 comma 750 miles in total. In deciding which depreciation method to​ use, Steven Kittridge​, the general​ manager, requests a depreciation schedule for each of the depreciation methods​ (straight-line, units-of-production, and​ double-declining-balance).Requirements 1. Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulated depreciation, and asset book value. 2. Rapid 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 Rapid uses the truck. Identify the depreciation method that meets the company's objectives.

Answer 1

See below and images.

Step-by-step explanation:

For part 1 refer to the images attached of each depreciation method.

The double declining method uses the rate of straight line method and doubles it. Rate = 1 / Useful life

For part 2)

As the company wants maximum revenue recording in early years, it shall use the straight line depreciation method as in the first years, this yields the least depreciation when compared to other methods. Year 1 depreciation for each method are as follows,

Straight line = 19,800

Double declining = 43,600

Units of mileage method = 20,800

So the method that meets company's objectives is the straight-line method.