Question - On January 9, 2010, Swifty Delivery Service purchased a truck at a cost of $67,000. Before placing the truck in service, Swifty spent $2,200 painting it, $500 replacing tires, and $5,000 overhauling the engine. The truck should remain in service for 6 years and have a residual value of $14,700. The truck's annual mileage is expected to be 15,000 miles in total. In deciding which depreciation method to use, Jerry Speers, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units of production ad double-declining balance)
1. Prepare a depreciation schedule for each deprecation method, showing asset cost, deprecation expense, accumulated depreciation, and asset book value.
2. Swifty prepares financial statements using the depreciation method that reports the highest net income in the early years of asset use. For income-tax purpose, the company uses the depreciation method that minimizes income taxes in the early years. Considet the first year that Swifty uses the truck. Identify the depreciation methods that meet the general manager's objectives, assuming the income tax authorities permit the use of any of the methods.