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Three different companies each purchased trucks on January 1, 2018, for $70,000. Each truck was expected to last four years or 200,000 miles. Salvage value was estimated to be $5,000. All three trucks were driven 66,000 miles in 2018, 41,000 miles in 2019, 39,000 miles in 2020, and 61,000 miles in 2021. Each of the three companies earned $59,000 of cash revenue during each of the four years. Company A uses straight-line depreciation, company B uses double-declining-balance depreciation, and company C uses units-of-production depreciation.

Required a-1.
Calculate the net income for 2018? (Round "Per Unit Cost" to 3 decimal places.) Net Income Company Company Company
a-2. Which company will report the highest amount of net income for 2018?
Company A
Company B
Company C
All of the choices

Respuesta :

TomShelby

Answer:

Company A  42,750 (highest)

Company B 35,000

Company C 21,450

Explanation:

straigh-line dpereication (Company A)

(acquisition - salvage) / useful life

(70,000 - 5,000) / 4 = 16,250

double declining (comopany B)

2/ useful life x carrying value

2/4 x 70,000 = 35,000

units of production:

(acquisition - salvage) / units of production x usage for the period

(70,000 - 5,000)  / 200,000 x 66,000 = 21,450

From the revenues we subtract the depreciation expense and get net income

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