Requirements 1. Prepare a schedule of depreciation expense per year for the van under the three depreciation methods. 2. Which method best tracks the wear and tear on the van? 3. Which method would Tasty Tongue prefer to use for income tax purposes? Explain in detail why Tasty Tongue prefers this method.
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- On January 3, 2018, Rapid Delivery Service purchased a truck at a cost of $100,000. Before placing the truck in service, Rapid spent $3,000 painting it, $600 replacing tires, and $10,400 overhauling the engine. The truck should remain in service for five years and have a residual value of $12,000. The truck’s annual mileage is expeZcted to be 32,000 miles in each of the first four years and 8,000 miles in the fifth year—136,000 journal entry to miles in total. In deciding which depreciation method to use, Andy Sargeant, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance). Requirements Prepare a depreciation schedule for each depreciation method, showingdepreciation expense, accumulated depreciation, and asset book value. Rapid prepares financial statements using the depreciation method that reports the highest net income in the early years of asset use. Consider the first two…On January 1, 1990, Alamo Steel Company purchased three used delivery trucks at a total cost of P630,000. Before placing the trucks in service, the company spent P22,000 painting them, P8,000 replacing their tires, and P40,000 overhauling their engines and reconditioning their bodies. Alamo management estimates that the trucks will remain in service for six years and have a residual value of P160,000. The trucks’ combined annual mileage is expected to be 18,000 miles in each of the first 4 years and 14,000 miles in each of the next two years. a) Prepare a depreciation schedule using double declining balance and using service output method b) What is the book value of the trucks at the end of 1993 using the straight line method.Chichi's Pizza purchased a delivery van on January 1, 2003 for $50,000. In addition, Chichi had to pay sales tax and title fees of 2,000. The van is expected to have a five-year useful life and a salvage value of $12,000. Also, the van is expected to drive 200,000 miles during its useful life. The van drove 33,000 miles in the first year and 46,000 in the second year (that's a lot of pizza). Using Units-of-Production depreciation, the accumulated depreciation at the end of the second year would be:
- Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.Tree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $5,000,000 for the land. Tree Lovers will sell the lumber as it is harvested and it expects to deplete it over ten years (150 acres in year one, 300 acres in year two, 250 acres in year three, 150 acres in year four, and 100 acres in year five). Calculate the depletion expense for the next five years and create the journal entry for year one.Finch, Inc., has purchased a new server and must decide what to do with the old one. The cost of the old server was originally $60,000 and has been depreciated $45,000. The company has received two offers. One offer was to lease the equipment for $7,000 for the next five years, but the company will be required to provide maintenance and insurance totaling $3,000 per year. The other offer was made to purchase the equipment outright for $18,500 less a 5% sales commission. Prepare a differential analysis. If required, use a minus sign to indicate a loss. Differential AnalysisLease (Alternative 1) or Sell (Alternative 2) Server Lease Server(Alternative 1) Sell Server(Alternative 2) DifferentialEffects(Alternative 2) Revenues $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 Costs fill in the blank 4 fill in the blank 5 fill in the blank 6 Profit (loss) $fill in the blank 7 $fill in the blank 8 $fill in the blank 9 Which offer should Finch, Inc., accept?
- Benson Freight Company owns a truck that cost $47,000. Currently, the truck’s book value is $22,000, and its expected remaining useful life is five years. Benson has the opportunity to purchase for $30,300 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $7,000 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $19,000.RequiredCalculate the total relevant costs. Should Benson replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out?On January 1, Celebrity Allures Inc. bought a new popcorn popper for one of their movie theaters. The popper cost $6,000. The expected life is 5 years with a salvage value of $500. The popper is expected to produce 50,000 buckets of popcorn over its life. In the first year, the popper produced 9,000 buckets of popcorn. In the second year, the popper produced 12,000 buckets of popcorn. What is the accumulated depreciation after the second year on the popcorn popper assuming double declining balance depreciation? $2,200 $3,840 $1,440 $2,400On January 1, Celebrity Allures Inc. bought a new popcorn popper for one of their movie theaters. The popper cost $8,000. The expected life is 8 years with a salvage value of $200. The popper is expected to produce 50,000 buckets of popcorn over its life. In the first year, the popper produced 9,000 buckets of popcorn. In the second year, the popper produced 12,000 buckets of popcorn. What is the second year depreciation expense on the popcorn popper assuming double declining balance depreciation? $3,500 $1,500 $975 $2,000
- Brown Company is considering the purchase of a new machine to replace an existing one. The old machine was purchased 3 years ago at a cost of $3,000, and it is being depreciated on a straight-line basis to a zero salvage value over a 6-year life. The current market value of the old machine is $2,000. The new machine, which falls into the MACRS 3-year class, has an estimated life of 3 years, it costs $5,000, and Brown plans to sell the machine at the end of the fifth year for $200. The applicable depreciation rates are 0.33, 0.45, 0.15, and 0.07. The new machine is expected to generate before-tax cash savings of $500 per year. The company's tax rate is 40 percent. if the firm’s cost of capital is 14 percent, what is the NPV of the proposed project?Macintosh Printing, Inc., purchased a $20,000 printing machine two years ago. The company expected this machine to have a seven-year life and a salvage value of $5,000. The company spent $5,000 last year on repairs, and current operating costs are running at the rate of $8,000 per year. Furthermore, the anticipated salvage value of the machine has been reduced to $2,500 at the end of its useful life. In addition, the company has found that the machine has a current market value of $10,000.A sales person offers a new printing machine for $18,000 with a useful life of 5 years. This new printer has no salvage value. The maintenance expenses of the new printer is $6,000 annually. The company’s MARR is 12%.a) Using Insider’s point of view, analyze if the replacement needs to be made.b) If the useful life of the new machine is 6 years, conduct the replacement analysis. Has the decision changed from the previous scenario? Justify.The Darlington Equipment Company purchased a machine 5 years ago at a cost of $85,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $8,500 per year. If the machine is not replaced, it can be sold for $5,000 at the end of its useful life. A new machine can be purchased for $170,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $45,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. The new machine is eligible for 100% bonus depreciation at the time of purchase. The old machine can be sold today for $50,000. The firm's tax rate is 25%. The appropriate WACC is 9%. If the new machine is purchased, what is the amount of the initial cash flow at Year 0 after bonus depreciation is considered? Cash outflow should be indicated by a minus sign. Round your answer to the nearest dollar.$…