I JUST NEED THE ANSWER, THX. Three different companies each purchased trucks on
ID: 2332901 • Letter: I
Question
I JUST NEED THE ANSWER, THX.
Three different companies each purchased trucks on January 1, 2018, for $80,000. Each truck was expected to last four years or 250,000 miles. Salvage value was estimated to be $4,000. All three trucks were driven 78,000 miles in 2018, 55,000 miles in 2019, 50,000 miles in 2020, and 70,000 miles in 2021. Each of the three companies earned $69,000 of cash revenue during each of the four years. Company A uses straight-line depreciation, company B uses double-declining-balance depreciation, and company C uses units-of-production depreciation.
Answer each of the following questions. Ignore the effects of income taxes.
a-1. Calculate the net income for 2018? (Round "Per Unit Cost" to 3 decimal places.)
a-2. Which company will report the highest amount of net income for 2018?
b-1. Calculate the net income for 2021? (Round "Per Unit Cost" to 3 decimal places.)
b-2. Which company will report the lowest amount of net income for 2021?
c-1. Calculate the book value on the December 31, 2020, balance sheet? (Round "Per Unit Cost" to 3 decimal places.)
c-2. Which company will report the highest book value on the December 31, 2020, balance sheet?
d-1. Calculate the retained earnings on the December 31, 2021, balance sheet?
d-2. Which company will report the highest amount of retained earnings on the December 31, 2021, balance sheet?
E.Which company will report the lowest amount of cash flow from operating activities on the 2020 statement of cash flows?
Explanation / Answer
a-1. Net income for 2018: Company A: Depreciation under SLM=(Cost-Salvage value)/useful life of the asset=(80000-4000)/4=$ 19000 Net income=Cash revenue-Depreciation=69000-19000=$ 50000 Company B: Double-declining balance depreciation rate=2*(1/useful life of the asset)=2*(1/4)*100=50% Depreciation for 2018=Cost*Rate=80000*50%=$ 40000 Net income=Cash revenue-Depreciation=69000-40000=$ 29000 Company C: Depreciation per miles=(Cost-Salvage value)/Total miles driven=(80000-4000)/(78000+55000+50000+70000)=76000/253000=$ 0.30 per mile Depreciation for 2018=Usage in 2018*Depreciation per mile=78000*0.30=$ 23400 Net income=Cash revenue-Depreciation=69000-23400=$ 45600 a-2. Highest amount of net income is reported by Company A b-1. Net income for 2021: Company A: Depreciation under SLM=(Cost-Salvage value)/useful life of the asset=(80000-4000)/4=$ 19000 Net incom=Cash revenue-Depreciation=69000-19000=$ 50000 Company B: Double-declining balance depreciation rate=2*(1/useful life of the asset)=2*(1/4)*100=50% Depreciation for 2018=Cost*Rate=80000*50%=$ 40000 Book value at the end of 2018=80000-40000=$ 40000 34500 Depreciation for 2019=Book valuet*Rate=40000*50%=$ 20000 Book value at the end of 2019=40000-20000=$ 20000 Depreciation for 2020=Book valuet*Rate=20000*50%=$ 10000 Book value at the end of 2020=20000-10000=$ 10000 Depreciation for 2021=Book valuet*Rate=10000*50%=$ 50000 Book value at the end of 2021=10000-5000=$ 5000 Net income=Cash revenue-Depreciation=69000-5000=$ 64000 Company C: Depreciation per miles=(Cost-Salvage value)/Total miles driven=(80000-4000)/(78000+55000+50000+70000)=76000/253000=$ 0.30 per mile Depreciation for 2021=70000*0.30=$ 21000 Net income=Cash revenue-Depreciation=69000-21000=$ 48000 b-2. Lowest amount of net income is reported by Company C c-1. Company A: Depreciation under SLM=(Cost-Salvage value)/useful life of the asset=(80000-4000)/4=$ 19000 Depreciation for 3 year=3*19000=$ 57000 Book value at the end of 2020=80000-57000=$ 23000 Company B: Double-declining balance depreciation rate=2*(1/useful life of the asset)=2*(1/4)*100=50% Depreciation for 2018=Cost*Rate=80000*50%=$ 40000 Book value at the end of 2018=80000-40000=$ 40000 Depreciation for 2019=Book valuet*Rate=40000*50%=$ 20000 Book value at the end of 2019=40000-20000=$ 20000 Depreciation for 2020=Book valuet*Rate=20000*50%=$ 10000 Book value at the end of 2020=20000-10000=$ 10000 Company C: Depreciation per miles=(Cost-Salvage value)/Total miles driven=(80000-4000)/(78000+55000+50000+70000)=76000/253000=$ 0.30 per mile Depreciation for 2018=Usage in 2018*Depreciation per mile=78000*0.30=$ 23400 Depreciation for 2019=Usage in 2019*Depreciation per mile=55000*0.30=$ 16500 Depreciation for 2020=Usage in 2020*Depreciation per mile=50000*0.30=$ 15000 Accumulated depreciation=23400+16500+15000=$ 54900 Book value at the end of 2020=80000-54900=$ 10000=$ 25100 c-2. Highest book value reported by Company C. d-1. Retained earnings on Dec 31,2021 Company A: Net income 2018 50000 2019 (69000-19000) 50000 2020 (69000-19000) 50000 2021 (69000-19000) 50000 200000 Balance in retained earnings=$ 200000 Company B: Net income 2018 29000 2019 (69000-20000) 49000 2020 (69000-10000) 59000 2021 (69000-5000) 64000 201000 Balance in retained earnings=$ 201000 Company C: Net income 2018 45600 2019 (69000-16500) 52500 2020 (69000-15000) 54000 2021 (69000-21000) 48000 200100 Balance in retained earnings=$ 200100 d-2. Htghest amount of retained earnings reported by Company B E. Cashflow from operating activities will be same for 3 companies since cashflow from operating activities will involve only cash revenue.Does not consider depreciation
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