Assume you have a flower shop and you bought a delivery van for $37,000. You expect the van to remain in service for three years (126,000 km). At the end of its useful life, you estimate that the van's residual value will be $1,720. You estimate the van will travel 32,000 km the first year, 52,000 km the second year, and 42,000 km the third year. Prepare an estimate of the depreciation expense per year for the van under the three depreciation methods. Show your computations. Which method do you think tracks the useful life cost on the van most closely? How does management determine which depreciation method to use? = Begin by calculating straight-line depreciation expense for each year. (Round the amounts for depreciation expense to the nearest whole dollar.) Depreciation expense Year 1 Year 2 ( / = Year 3 Next show your computations for units-of-production depreciation expense for each year. (Round intermediate calculations to two decimal places. Round the amounts for depreciation expense to the nearest whole dollar. For years with $0 depreciation, make sure to enter "0" in the appropriate column.) Next show your computations for units-of-production depreciation expense for each year. (Round intermediate calculations to two decimal places. Round the amounts for depreciation expense to the nearest whole dollar. For years with $0 depreciation, make sure to enter "0" in the appropriate column.) = Depreciation expense Year 1 Year 2 Year 3 Then show your computations for double-diminishing-balance method of depreciation. (Round intermediate calculations to two decimal places. Round the amounts for depreciation expense to the nearest whole dollar. For years with $0 depreciation, make sure to enter "0" in the appropriate column.) = Depreciation expense X Year 1 Year 2 X Year 3 Which method do you think tracks the useful life cost on the van most closely? How does management determine what depreciation method to use? The V method tracks the useful life cost of the van most closely How does management determine what depreciation method to use? O A. Management should choose the depreciation method that charges the smallest depreciation expense in the current year. O B. Management should choose a depreciation method that reflects the pattern in which the asset will be used. O C. Management should choose a depreciation method that gives them the largest potential for future growth. OD. Management should choose the depreciation method that charges the largest depreciation expense in the current year
