Exhibit A - Fast Transport Inc. (Fast)

On July 1, 2016, Fast purchased a truck for $52,000 on account. The truck had estimated residual value of $4,000 after 4 years of its useful life, or 400,000 kilometers. The truck drove 59,000 kilometers in 2016, 91,000 kilometers in 2017, 120,000 kilometers in 2018, and 95,000 kilometers in 2019. Fast has December 31st fiscal year end.

Scenario 1) Refer to Exhibit A and prepare journal entries to record depreciation expense for years 2016 to 2019 if units-of-production was the method to determine depreciation expense.

Scenario 2) Refer to Exhibit A and prepare journal entries to record the following transactions if Double-Declining-Balance was the method to determine depreciation expense.

1.Depreciation expense for 2018 to 2019 and,

2.Sales of the truck on April 30^th, 2019 for;

a.Sold the truck for $8,125 cash

b.Sold the truck for $10,000 cash

c.Sold the truck for $6,000on account.

Scenario 3) Refer to the Exhibit A and the following information:

1.Fast used straight-line method of depreciation,

2.On July 2, 2017, a new canopy was installed onto the truck at a cost of $4,000,

3.On July 2, 2017, a major repair which cost $6,000 changed the useful life of the truck from four years to six years, and

4.After the above changes, the estimated residual value was changed from $4,000 to $$2,000..

Prepare the following journal entries:

a.Prepare journal entries to record installation of the canopy and major repair for cash on July 2^nd , 2017.

b.Prepare journal entries to record depreciation expense for year 2017.

c.Close the depreciation expense account on December 31, 2017.

Comparison analysis:

With reference to your solutions for Scenario 1, 2, and 3 answer to the following,

i)What method of depreciation will suit Fast Transport Inc.?

ii)Briefly and in point form Justify your answer for (i) above.