On

January 11, 2016, Quick Delivery Service purchased a truck at a cost of $100,000. Before placing the truck in service, Quick spent $3,000 painting it, $1,200 replacing tires, and $9,800 overhauling the engine. The truck should remain in service for five years and have a residual value of $12,000. The truck's annual mileage is expected to be 32,000 miles in each of the first four years and 8,000 miles in the fifth year; 136,000 miles in total. In deciding which depreciation method to use, Harvey Warner the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance).Read the requirements.

Requirement 1. Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulated depreciation, and asset book value.

Begin by preparing a depreciation schedule using the straight-line method.

Straight-Line Depreciation Schedule
		Depreciation for the Year
	Asset	Depreciable		Depreciation		Depreciation	Accumulated	Book
Date	Cost	Cost		Rate		Expense	Depreciation	Value
1-1-2016
12-31-2016			/		=
12-31-2017			/		=
12-31-2018			/		=
12-31-2019			/		=
12-31-2020			/		=

Before completing the units-of-production depreciation schedule, calculate the depreciation expense per unit. (Round depreciation expense per unit to two decimal places.)

(		-		) /		=	Depreciation per unit
(		-		) /		=

Prepare a depreciation schedule using the units-of-production method. (Enter the depreciation per unit to two decimal places, $X.XX.)

Units-of-Production Depreciation Schedule
		Depreciation for the Year
	Asset	Depreciation		Number of		Depreciation	Accumulated	Book
Date	Cost	Per Unit		Units		Expense	Depreciation	Value
1-1-2016
12-31-2016			x		=
12-31-2017			x		=
12-31-2018			x		=
12-31-2019			x		=
12-31-2020			x		=

Prepare a depreciation schedule using the double-declining-balance (DDB) method. (Round depreciation expense to the nearest whole dollar.)

Double-Declining-Balance Depreciation Schedule
		Depreciation for the Year
	Asset	Book		DDB		Depreciation	Accumulated	Book
Date	Cost	Value		Rate		Expense	Depreciation	Value
1-1-2016
12-31-2016			x		=
12-31-2017			x		=
12-31-2018			x		=
12-31-2019			x		=
12-31-2020

Requirement 2.

QuickQuick

prepares financial statements using the depreciation method that reports the highest net income in the early years of asset use. Consider the first year that

QuickQuick

uses the truck. Identify the depreciation method that meets the company's objectives.The depreciation method that reports the highest net income in the first year is the

double-declining-balance

straight-line

units-of-production

method. It produces the

highest

lowest

depreciation expense and therefore the highest net income.