New Life Spring Water Company recently purchased a new delivery truck for $100 000. Management expects the truck to generate the following additional annual revenues and expenses during its useful life.

Average incremental revenue .................................................... $50 000

Average incremental expenses, not including depreciation ..................20 000

The truck has an expected life of six years and is depreciated using the straight-line method. Ignore any income taxes.

Required:

1 Prepare a schedule showing the incremental revenue, incremental operating expenses and incremental depreciation during each of the next six years.

2 Calculate the accounting rate of return on the delivery truck, using the initial investment as the denominator.