Freebird Inc acquired a truck to transport its inventory from the port to its various stores. The truck cost $125,000; taxes and licensing fees were $12,000; a custom paint job to put the firm logo on cost $5,000. In the first week of use, an inexperienced driver shredded two of the truck's tires, necessitating replacement tires that cost $750. The truck is estimated to last 5 years or 200,000 miles. It has an expected salvage value of $10,000. In year 1, the truck is estimated to be driven 40,000 miles; in years 2 and 3 the truck's mileage is estimated to be 50,000 per year, and 30,000 per year for years 4 and 5. Required: Find the depreciation expense, A/D, and book value after two years, using 3 different methods: straight-line, units of production, double-declining balance.
Freebird Inc acquired a truck to transport its inventory from the port to its various stores. The truck cost $125,000; taxes and licensing fees were $12,000; a custom paint job to put the firm logo on cost $5,000. In the first week of use, an inexperienced driver shredded two of the truck's tires, necessitating replacement tires that cost $750. The truck is estimated to last 5 years or 200,000 miles. It has an expected salvage value of $10,000. In year 1, the truck is estimated to be driven 40,000 miles; in years 2 and 3 the truck's mileage is estimated to be 50,000 per year, and 30,000 per year for years 4 and 5. Required: Find the depreciation expense, A/D, and book value after two years, using 3 different methods: straight-line, units of production, double-declining balance.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Freebird Inc acquired a truck to transport its inventory from the port to its various stores. The truck cost $125,000; taxes and licensing
fees were $12,000; a custom paint job to put the firm logo on cost $5,000. In the first week of use, an inexperienced driver shredded
two of the truck's tires, necessitating replacement tires that cost $750. The truck is estimated to last 5 years or 200,000 miles. It has an
expected salvage value of $10,000.
In year 1, the truck is estimated to be driven 40,000 miles; in years 2 and 3 the truck's mileage is estimated to be 50,000 per year, and
30,000 per year for years 4 and 5.
Required:
Find the depreciation expense, A/D, and book value after two years, using 3 different methods: straight-line, units of production,
double-declining balance.
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