Response to the following problem:
On January 2, 20X4, McIntosh Speed Co. purchased a used trailer at a cost of $63,000. Before placing the trailer in service, the company spent $2,200 painting it, $800 replacing tires, and $4,000 overhauling the chassis. McIntosh management estimates that the trailer will remain in service for 6 years and have a residual value of $14,200. The trailer's annual mileage is expected to be 18,000 miles in each of the first four years and 14,000 miles in each of the next two years-100,000 miles in total. In deciding which depreciation method to use, Larry McIntosh, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-ofproduction, and double-declining-balance).
Required:
1. Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulated depreciation, and asset book value. For the unitsof-production method, round depreciation per mile to three decimal places.
2. McIntosh prepares financial statements using the depreciation method that reports the highest net income in the early years of asset use. For income-tax purposes, however, the company uses the depreciation method that minimizes income taxes in the early years. Consider the first year that McIntosh uses the trailer. Identify the depreciation methods that meet the general manager's objectives, assuming the income tax authorities permit the use of any of the methods.