Question
On January 8, 2017, Whitewater Riders purchased a van to transport rafters back to the point of departure after completing the on-the-water portion of the
On January 8, 2017, Whitewater Riders purchased a van to transport rafters back to the point of departure after completing the on-the-water portion of the rafting adventures they operate. The cost of the van is $44,000 and Whitewater Rider expects to use the van for four years or 60,000 miles. The estimated selling price after four years is $2,000. The van was driven 12,000 miles in 2017, 18,000 miles in 2018, 21,000 miles in 2019, and 10,000 miles in 2020.
Required:
On the following Whitewater Riders worksheet, compute the annual depreciation expense and ending book value of the van using straight-line, double-declining, and units-of-production methods. In addition, answer the three questions below:
1. Which method results in the highest net income for Whitewater Riders?
a. 2017 b. 2018 c. 2019. d. 2020
2. Which method results in the lowest income tax liability for Whitewater Riders?
a. 2017 b. 2018 c. 2019. d. 2020
3. Which method would you recommend Whitewater Riders use and why?
Whitewater Riders
Schedule of Van Depreciation for years 2017- 2020
Depreciation Method Year Depreciation expense Ending Book Value
Straight-line 2017
Straight-line 2018
Straight-line 2019
Straight-line 2020
Double-declining 2017
Double-declining 2018
Double-declining 2019
Double-declining 2020
Units-of-production 2017
Units-of-production 2018
Units-of-production 2019
Units-of-production 2020
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