On January 3, 2018, Nimble Delivery Service purchased a truck at a cost of $80,0
ID: 2397629 • Letter: O
Question
On January 3, 2018, Nimble Delivery Service purchased a truck at a cost of $80,000. Before placing the truck in service, Nimble spent S3,000 painting it, $500 replacing tires, and $8,500 overhauling th engine. The truck should remain in service for five years and have a residual value of $8,000. The truck's annual mileage is expected to be 30,000 miles in each of the first four years and 20,000 miles i the fifth year140,000 miles in total. In deciding which depreciation method to use, Jordan Lipnik, the general manager, requests a depreciation schedule for each of the depreciation methods straight-line, units-of-production, and double-declining-balance). Book Asset Depreciation Cost Depreciation Accumulated Expense Depreciation Number of Per Unit Units 1-3-20 12-31-2018 12-31-2019 12-31-2020 12-31-2022 Prepare a depreciation schedule using the double-declining-balance (DDB) method. (Round depreciation expense to the nearest whole dollar.) Double-Declining-Balance Depreciation Schedule Depreciation for the Year DDB Rate Asset Book Depreciation Accumulated Book Date Cost Value ExpenseDepreciation Value 1-3-2018 12-31-2018 12-31-2019 12-31-2020 12-31-2021 12-31-2022 Requirement 2. Nimble 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 Nimble uses the truck. Identify the depreciation method that meets the company's objectives The depreciation method that reports the highest net income in the first year is the method. It produces the Vdepreciation expense and therefore the highest net ncomeExplanation / Answer
Date
Asset Cost
Depreciation for the year
Book Value
DDB Rate
Depreciation Expense
Accumulated Depreciation
Book Value
1-3-2018
92,000
12-31-2018
92,000
40%
36,800
36,800
55,200
12-31-2019
55,200
40%
22,080
58,880
33,120
12-31-2020
33,120
40%
13,248
72,128
19,872
12-31-2021
19,872
40%
7,949
80,077
11,923
12-31-2022
11,923
-
3,923
84,000
8,000
*Asset Cost
= Cost of the Truck + Painting cost + Cost for replacing tires + cost for overhauling the engine
= $80,000 + 3,000 + 500 + 8,500
= $92,000
**DDB rate = 2 x [1/Useful Life] = 2 x [1/5] = 40%
Date
Asset Cost
Depreciation for the year
Book Value
DDB Rate
Depreciation Expense
Accumulated Depreciation
Book Value
1-3-2018
92,000
12-31-2018
92,000
40%
36,800
36,800
55,200
12-31-2019
55,200
40%
22,080
58,880
33,120
12-31-2020
33,120
40%
13,248
72,128
19,872
12-31-2021
19,872
40%
7,949
80,077
11,923
12-31-2022
11,923
-
3,923
84,000
8,000
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