Show all calculations for your solution to the following problem: UOP Pizza boug
ID: 2585962 • Letter: S
Question
Show all calculations for your solution to the following problem:
UOP Pizza bought a used Chevy delivery van on January 2, 2016 for $22,800. The van was expected to remain in service for four years (48,750 miles). At the end of its useful life, UOP officials estimated that the van's residual value would be $2,500. The van traveled 15,000 miles the first year, 17,000 miles the second year, 12,500 miles the third year, and 4,250 miles in the fourth year.
Prepare a schedule of depreciation expense per year for the van under the three depreciation methods
Straight Line
Units of production
Double-declining balance—an accelerated depreciation method
Which method best tracks the wear and tear on the van? Which method would UOP prefer to use for income tax purposes? Explain in detail why UOP would prefer this method.
Cost $22,800 Life 4 Total Miles 48,750 Residual Value 2,500 Years 1 15,000 2 17,000 3 12,500 4 4,250 Straight line Book Value Depreciation expense Accumulated Depreciation Book Value Year End 22800-2500=20300 2016 22,800 5075 5075 17725 20300/4= 5075 2017 17,725 5075 10150 12650 2018 12,650 5075 15225 7575 2019 7,575 5075 20300 2500 Units of production Year Cost Rate per Unit Annual Depreciation Expense Accumulated depreciation Book Value 01/01/2016 22,800 22,800 01/31/2016 01/31/2017 01/31/2018 01/31/2019 Double-declining balance Cost DDB Rate Annual Depreciation Expense Accumulated Depreciation Book Value 01/01/2016 22800 22800 01/31/2016 01/31/2017 01/31/2018 01/01/2019Explanation / Answer
Cost 22,800 Life 4 Total Miles 48,750 Residual Value 2,500 Years 1 15,000 2 17,000 3 12,500 4 4,250 Total Miles 48,750 Straight line Book Value Depreciation expense Accumulated Depreciation Book Value Year End 22800-2500=20300 2016 22,800 5075 5075 17725 20300/4= 5075 2017 17,725 5075 10150 12650 2018 12,650 5075 15225 7575 2019 7,575 5075 20300 2500 Depreciable Cost 20,300 Total Miles 48750 Cost Per Mile 0.42 (Usage* Rate PU) Units of production Year Cost Rate per Unit Annual Depreciation Expense Accumulated depreciation Book Value 01-01-2016 22,800 22,800 01/31/2016 0.42 6,246.15 6,246.15 01/31/2017 0.42 7,078.97 13,325.13 01/31/2018 0.42 5,205.13 18,530.26 01/31/2019 0.42 1,769.74 20,300.00 Depreciation Rate 1/n 25.00% Double Declining Rate 50.00% (Rate*2) Double-declining balance Cost DDB Rate Annual Depreciation Expense Accumulated Depreciation Book Value 01-01-2016 22800 22800 01/31/2016 22800 50.00% 11400 11400 01/31/2017 11400 50.00% 5700 17100 01/31/2018 5700 50.00% 2850 19950 01-01-2019 2850 50.00% 350 20300 (2850*50% But limited to Salavage Value) 1 Unit of Production method is the best method to Depreciate VANs 2 Preferable Method for Income Tax is Double Declining Balance Method Because Double Declining Method provides the Most Depreciation Thus providing the largest Deductions in the early life of the assets