C10-1 Calculating Interest and Depreciation Expenses and Effects on Loan Covenant Ratios (Chapters 9 and 10) [LO 9-3, LO 9-7, LO 10-2, LO 10-5]

Zoom Car Corporation (ZCC) plans to purchase approximately 100 vehicles on December 31, 2015, for $2.6 million, plus 9 percent total sales tax. ZCC expects to use the vehicles for 5 years and then sell them for approximately $494,000. ZCC anticipates the following average vehicle use over each year ended December 31:

						2016	2017	2018	2019	2020
Miles per year						15,000	20,000	19,000	19,000	5,000

To finance the purchase, ZCC signed a 5-year promissory note on December 31, 2015, for $2.34 million, with interest paid annually at the market interest rate of 6 percent. The note carries loan covenants that require ZCC to maintain a minimum times interest earned ratio of 3.0 and a minimum fixed asset turnover ratio of 1.0. ZCC forecasts that the company will generate the following sales and preliminary earnings (prior to recording depreciation on the vehicles and interest on the note). (For purposes of this question, ignore income tax.)

(in 000s)	2016			2017			2018			2019			2020
Sales Revenue	$		2,600	$		3,100	$		3,400	$		3,500	$		3,600
Income before Depreciation and Interest Expense			1,300			1,500			1,700			1,800			1,900

3.	Using your answers to requirements 1 and 2, determine net income and the two loan covenant ratios in each year, assuming the company chooses the following depreciation methods:

(a)	Straight-line (Enter your answers for Net Income in thousands (i.e., 50,500 should be entered as 50.5). Round "Net Income" to 1 decimal place and "Ratio Values" to 2 decimal places.)

(b)	Double-declining-balance (Enter your answers for Net Income in thousands (i.e., 50,500 should be entered as 50.5). Round "Net Income" to 1 decimal place and "Ratio Values" to 2 decimal places.)

(c)	Units-of-production (Enter your answers for Net Income in thousands (i.e., 50,500 should be entered as 50.5). Round "Net Income" to 1 decimal place and "Ratio Values" to 2 decimal places.)

Need in chart as provided in the screenshots, already solved the first parts, need help on 3A,3B,3C

Required: 1. Calculate the amount of interest expense that would be recorded each yea. Interest Expense $140,400 per year 2. Calculate the depreciation expense that would be recorded each year, using the following depreciation methods: (a) Straight-line Straight-line Depreciation $ 468,000 per year (b) Double-declining-balance (Do not round intermediate calculations.) Depreciation Expense 2016 1,133,600 2017 S 2018 $ 2019 $ 2020 680,160 408,096 118,144