Midtown\'s Pizza bought a used Toyota delivery van on January 2,2014, for $18,00
ID: 2447059 • Letter: M
Question
Midtown's Pizza bought a used Toyota delivery van on January 2,2014, for $18,000. The van was expected to remain in service for four years (41,750 miles). At the end of its useful life. Midtown?s officials estimated that the van's residual value would be $1,300 The van traveled 13,000 miles the first year, 11,250 miles the second year, 10,250 miles the third year, and 7,250 miles in the fourth year Requirements 1. Prepare a schedule of depreciation expense per year for the van under the three depreciation methods 2, Which method best tracks the wear and tear on the van? 3. Which method would Midtown?s prefer to use for income tax purposes? Explain in detail why Midtown's prefers this method. Requirement 1. Prepare a schedule of depreciation expense per year for the van under the three depreciation methods. (For units-of-production and double-declining-balance, round to the nearest two decimal places after each step of the calculation For years with $0 depreciation, make sure to enter ''0'' in the appropriate column.) Requirement 2. Which method best tracks the wear and tear on the van? The method tracks the wear and tear on the van most closely. Requirement 3. Which method would Midtown?s prefer to use for income tax purposes? Explain in detail why Midtowns prefers this method For income tax purposes. Midtown's would prefer the method because it provides the depreciation, and thus, the tax deductions in the early life of the assetExplanation / Answer
Straight line units of production Double declining balance 2014 4175 13000*0.4 5200 18000*2/4 9000 2015 4175 11250*0.4 4500 (18000-I77)*2/4 4500 2016 4175 10250*0.4 4100 (18000-I77-I78)*2/4 2250 2017 4175 18000-SUM(H77:H79)-1300 2900 18000-SUM(I77:I79)-1300 950 16700 16700 16700 (18000-1300)/4=4175 (18000-1300)/41750=0.4 unit of production best tracks wear and tear