Natalie is thinking of buying a van that will be used only for business. The cost of the van is estimated at $36,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last about 5 years, and she expects to drive it for 200,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $7,500. Assume that she will buy the van on August 15, 2020, and it will be ready for use on September 1, 2020. Natalie is concerned about the impact of the vans cost on her income statement and balance sheet. She has come to you for advice on calculating the vans depreciation.

(a)

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Determine the cost of the van.

Cost of the van

$enter cost of the van in dollars

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(b)

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Prepare three depreciation tables for 2020, 2021, and 2022: one for straight-line depreciation (similar to the one in Illustration 9.10), one for double-declining balance depreciation (Illustration 9.14), and one for units-of-activity depreciation (Illustration 9.12). For units-of-activity, Natalie estimates she will drive the van as follows: 15,000 miles in 2020; 50,000 miles in 2021; 50,000 miles in 2022; 45,000 miles in 2023; 40,000 miles in 2024. Recall that Cookie Creations has a December 31 year-end. (Round depreciation cost/unit to 3 decimal places, e.g. 0.225.) Straight-line depreciation

Year		Depreciable Cost		Depreciation Expense		Accumulated Depreciation		Net Book Value
								$enter net book value in dollars
2020		$enter depreciable cost in dollars		$enter depreciation expense in dollars		$enter accumulated depreciation in dollars		enter net book value in dollars
2021		enter depreciable cost in dollars		enter depreciation expense in dollars		enter accumulated depreciation in dollars		enter net book value in dollars
2022		enter depreciable cost in dollars		enter depreciation expense in dollars		enter accumulated depreciation in dollars		enter net book value in dollars

Double-declining-balance depreciation

Year		NBV (Beg. of Year)		Depreciation Expense		Accumulated Depreciation		Net Book Value
								$enter net book value in dollars
2020		$enter NBV in dollars		$enter depreciation expense in dollars		$enter accumulated depreciation in dollars		enter net book value in dollars
2021		enter NBV in dollars		enter depreciation expense in dollars		enter accumulated depreciation in dollars		enter net book value in dollars
2022		enter NBV in dollars		enter depreciation expense in dollars		enter accumulated depreciation in dollars		enter net book value in dollars

Units-of activity depreciation

Year		Units of Activity		Depreciation Expense		Accumulated Depreciation		Net Book Value
								$enter net book value in dollars
2020		enter Units of Activity		$enter depreciation expense in dollars		$enter accumulated depreciation in dollars		enter net book value in dollars
2021		enter Units of Activity		enter depreciation expense in dollars		enter accumulated depreciation in dollars		enter net book value in dollars
2022		enter Units of Activity		enter depreciation expense in dollars		enter accumulated depreciation in dollars		enter net book value in dollars

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(c)

What impact will the three methods of depreciation have on Natalies balance sheet at December 31, 2020? What impact will the three methods have on Natalies income statement in 2020?

		Straight-Line		Double-declining Balance		Units-of-Activity
Cost of asset		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Accumulated depreciation		enter a dollar amount		enter a dollar amount		enter a dollar amount
Net book value		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Depreciation expense		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount

Lowest amount of net income		select a method Double-declining methodStraight-line methodUnits-of-activity method
Lowest amount of stockholders' equity		select a method Double-declining methodStraight-line methodUnits-of-activity method
Lowest net book value		select a method Double-declining methodStraight-line methodUnits-of-activity method
Greatest amount of net income		select a method Double-declining methodUnits-of-activity methodStraight-line method
Greatest amount of stockholders' equity		select a method Double-declining methodUnits-of-activity methodStraight-line method
Greatest net book value		select a method Units-of-activity methodDouble-declining methodStraight-line method

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(e)

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