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Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Thaxton, Incorporated, purchased a used truck for deliveries and is attempting to determine how much depreciation expense
would be recognized under three different methods. The truck cost $20,000 and is expected to have a value of $4,000 at the
end of its five-year life. The truck is expected to be used at the rate of 10,000 miles in the first year, 20,000 miles in the second
and third years, and 15,000 miles in each of the fourth and fifth years.
Required:
a. Determine the amount of depreciation expense that Thaxton should expect to recognize under each of the following
depreciation methods in the first and second years of the truck's useful life. A full year's depreciation will be recognized in the
first year the truck is used.
1. Straight-line.
2. Double-declining-balance.
3. Units-of-output (based on miles).
b. Prepare the plant assets section of the balance sheet at the end of the second year of the asset's useful life under the
straight-line method, assuming the truck is the only plant asset owned by Thaxton, Incorporated.
Complete this question by entering your answers in the tabs below.
Required A Required B
Determine the amount of depreciation expense that Thaxton should expect to recognize under each of the following
depreciation methods in the first and second years of the truck's useful life. A full year's depreciation will be recognized in the
first year the truck is used.
Straight-line
Double-declining-balance
1st Year
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