P 10-4B January 2 20X4 Makinthosh speed Co. purchased a used trailer at a cost of $63,000. before placing the trailer in service, the company spent $2,200 painting it, $8,00 replacing tires, and $4,000 overhauling the chassis, McIntosh management estimates that the trailer will remain in service for 6 years and have a residual value of $14,200. the trailer’s annual mileage is expected to be 18,000 miles in each of the first 4 years and 14,000 in each of the next two years-100,000 miles in total. In deciding which depreciation method to use, Larry McIntosh, the general manager, requests a depreciation schedule for each of a depreciation methods(straight-line, unit of production, and double-declining-balance).
Required
1. Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulated depreciation, and asset book value. For the units of-production method, round depreciation per mile to three decimal places.
2. McIntosh prepares financial statements using the depreciation method that reports the highest net income in the early years of asset use. For income-tax purpose, however the company uses the depreciation method that minimizes the income taxes in the early years. Consider the first year that McIntosh uses the trailer. Identify the depreciation methods that meet the general manager’s objectives, assuming the income tax authorities permit the use of any of the methods.
File name:
Makinthosh-speed-Co.doc File type:
application/msword Price:
$8
No comments:
Post a Comment