R. C. Smith purchased a truck for $30,500 to be used in his business. He is considering depre- ciating the truck by two methods: units-of-output (assuming total miles driven of 80,000) and double-declining balance (assuming a five-year useful life). The truck is expected to be sold for approximately $6,500 at the end of its useful life. Prepare a comparison of the first year’s depreciation expense that will be recognized under these methods, assuming the truck was actually driven 10,000 miles in the first year. Briefly state why the difference between the two is so great.
R. C. Smith purchased a truck for $30,500 to be used in his business. He is considering depre- ciating the truck by two methods: units-of-output (assuming total miles driven of 80,000) and double-declining balance (assuming a five-year useful life). The truck is expected to be sold for approximately $6,500 at the end of its useful life. Prepare a comparison of the first year’s depreciation expense that will be recognized under these methods, assuming the truck was actually driven 10,000 miles in the first year. Briefly state why the difference between the two is so great.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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R. C. Smith purchased a truck for $30,500 to be used in his business. He is considering depre- ciating the truck by two methods: units-of-output (assuming total miles driven of 80,000) and double-declining balance (assuming a five-year useful life). The truck is expected to be sold for approximately $6,500 at the end of its useful life. Prepare a comparison of the first year’s
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