Determining asset cost, preparing depreciation schedules (3 methods), and identifying depreciation results that meet management objectives
on january 3, 2018, rapid delivery service purchased a truck at a cost of $100,000. before placing the truck in service,
rapid spent $3,000 painting it, $600 replacing tires, and $10,400 overhauling the engine. the truck should remain in
service for ve years and have a residual value of $12,000. the truck’s annual mileage is expected to be 32,000 miles in
each of the rst four years and 8,000 miles in the fth year—136,000 miles in total. in deciding which depreciation method to use, andy sargeant, 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 nancial statements using the depreciation method that reports the highest net income in the early
years of asset use, consider the rst year that rapid uses the truck. identify the depreciation method that meets the
company’s objectives.