Archie Stanton starts a trucking business on January 1^st, 2020. He decides to rent his premises in which to conduct his business and house his trucks.On January 1^sthe purchases 5 truckseachcosting $255,000. Archie believes that the trucks have a useful life of 4 years.He also intends to offer delivery services over very long distances with heavily loaded trucks such that at the end of the 4 years they willeachhave a residual value of only $6,528. Archie has asked you to advise him on which depreciation method he should adopt for the preparation of his financial statements. He wants to consider the use of either straight-line depreciation or reducing balance depreciation since keeping track of the number of kilometres travelled by each truck will be too onerous for the use of the units of production method. You determine that the correct depreciation rate for the use of the reducing balance method is 60%. Archie has also decided to produce his financial statements on December 31^steach year.

You come back to Archie with the following tables that show how the Depreciation expense each year and the Carrying Value of the Trucks will vary based on the depreciation method chosen.

Delivery Truck Details Cost Price of the trucks. 5 trucks @ $255,000 each $1,275,000 Residual value of the trucks . 5 trucks @ $6,528 each $32,640 Depreciable Amount of the trucks $1,242,360 Straight-line depreciation each year for 4 years $1,242,360/4 = $310,590 Reducing Balance depreciation rate 60% Straight-Line Depreciation Allocation of the $1,242,360 Depreciable Amount 1st Jan 2020 31st Dec 2020 31st Dec 2021 31st Dec 2022 31st Dec 2023 Cost of Trucks . .. . . . . . . . .... $1,275,000 $1,275,000 $1,275,000 $1,275,000 $1,275,000 Accumulated Depreciation 0 $310,590 $621,180 $931,770 $1,242,360 Carrying Value .... $1,275,000 $964.410 $653,820 $343,230 $32,640 Annual Depreciation Expense $310,590 $310,590 $310,590 $310,590 Reducing Balance Depreciation Allocation of the $1,242,360 Depreciable Amount 1st Jan 2020 31st Dec 2020 31st Dec 2021 31st Dec 2022 31st Dec 2023 Cost of Trucks ...... ........ $1,275,000 $1,275,000 $1,275,000 $1,275,000 $1,275,000 Accumulated Depreciation $1,275,000 0 $765,000 $1,071,000 $1,193,400 $1,242,360 Carrying Value .... . .... $510,000 $204,000 $81,600 $32,640 Annual Depreciation Expense $765.000 $306,000 $122,400 $48,960