Question

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I JUST NEED THE ANSWER, THX. Three different companies each purchased trucks on January 1, 2018,...

I JUST NEED THE ANSWER, THX.

Three different companies each purchased trucks on January 1, 2018, for $80,000. Each truck was expected to last four years or 250,000 miles. Salvage value was estimated to be $4,000. All three trucks were driven 78,000 miles in 2018, 55,000 miles in 2019, 50,000 miles in 2020, and 70,000 miles in 2021. Each of the three companies earned $69,000 of cash revenue during each of the four years. Company A uses straight-line depreciation, company B uses double-declining-balance depreciation, and company C uses units-of-production depreciation.
Answer each of the following questions. Ignore the effects of income taxes.

a-1. Calculate the net income for 2018? (Round "Per Unit Cost" to 3 decimal places.)

a-2. Which company will report the highest amount of net income for 2018?

b-1. Calculate the net income for 2021? (Round "Per Unit Cost" to 3 decimal places.)

b-2. Which company will report the lowest amount of net income for 2021?

c-1. Calculate the book value on the December 31, 2020, balance sheet? (Round "Per Unit Cost" to 3 decimal places.)

c-2. Which company will report the highest book value on the December 31, 2020, balance sheet?

d-1. Calculate the retained earnings on the December 31, 2021, balance sheet?

d-2. Which company will report the highest amount of retained earnings on the December 31, 2021, balance sheet?

E.Which company will report the lowest amount of cash flow from operating activities on the 2020 statement of cash flows?

Solutions

Expert Solution

a-1. Net income for 2018:
Company A:
Depreciation under SLM=(Cost-Salvage value)/useful life of the asset=(80000-4000)/4=$ 19000
Net income=Cash revenue-Depreciation=69000-19000=$ 50000
Company B:
Double-declining balance depreciation rate=2*(1/useful life of the asset)=2*(1/4)*100=50%
Depreciation for 2018=Cost*Rate=80000*50%=$ 40000
Net income=Cash revenue-Depreciation=69000-40000=$ 29000
Company C:
Depreciation per miles=(Cost-Salvage value)/Total miles driven=(80000-4000)/(78000+55000+50000+70000)=76000/253000=$ 0.30 per mile
Depreciation for 2018=Usage in 2018*Depreciation per mile=78000*0.30=$ 23400
Net income=Cash revenue-Depreciation=69000-23400=$ 45600
a-2. Highest amount of net income is reported by Company A
b-1. Net income for 2021:
Company A:
Depreciation under SLM=(Cost-Salvage value)/useful life of the asset=(80000-4000)/4=$ 19000
Net incom=Cash revenue-Depreciation=69000-19000=$ 50000
Company B:
Double-declining balance depreciation rate=2*(1/useful life of the asset)=2*(1/4)*100=50%
Depreciation for 2018=Cost*Rate=80000*50%=$ 40000
Book value at the end of 2018=80000-40000=$ 40000 34500
Depreciation for 2019=Book valuet*Rate=40000*50%=$ 20000
Book value at the end of 2019=40000-20000=$ 20000
Depreciation for 2020=Book valuet*Rate=20000*50%=$ 10000
Book value at the end of 2020=20000-10000=$ 10000
Depreciation for 2021=Book valuet*Rate=10000*50%=$ 50000
Book value at the end of 2021=10000-5000=$ 5000
Net income=Cash revenue-Depreciation=69000-5000=$ 64000
Company C:
Depreciation per miles=(Cost-Salvage value)/Total miles driven=(80000-4000)/(78000+55000+50000+70000)=76000/253000=$ 0.30 per mile
Depreciation for 2021=70000*0.30=$ 21000
Net income=Cash revenue-Depreciation=69000-21000=$ 48000
b-2. Lowest amount of net income is reported by Company C
c-1. Company A:
Depreciation under SLM=(Cost-Salvage value)/useful life of the asset=(80000-4000)/4=$ 19000
Depreciation for 3 year=3*19000=$ 57000
Book value at the end of 2020=80000-57000=$ 23000
Company B:
Double-declining balance depreciation rate=2*(1/useful life of the asset)=2*(1/4)*100=50%
Depreciation for 2018=Cost*Rate=80000*50%=$ 40000
Book value at the end of 2018=80000-40000=$ 40000
Depreciation for 2019=Book valuet*Rate=40000*50%=$ 20000
Book value at the end of 2019=40000-20000=$ 20000
Depreciation for 2020=Book valuet*Rate=20000*50%=$ 10000
Book value at the end of 2020=20000-10000=$ 10000
Company C:
Depreciation per miles=(Cost-Salvage value)/Total miles driven=(80000-4000)/(78000+55000+50000+70000)=76000/253000=$ 0.30 per mile
Depreciation for 2018=Usage in 2018*Depreciation per mile=78000*0.30=$ 23400
Depreciation for 2019=Usage in 2019*Depreciation per mile=55000*0.30=$ 16500
Depreciation for 2020=Usage in 2020*Depreciation per mile=50000*0.30=$ 15000
Accumulated depreciation=23400+16500+15000=$ 54900
Book value at the end of 2020=80000-54900=$ 10000=$ 25100
c-2. Highest book value reported by Company C.
d-1. Retained earnings on Dec 31,2021
Company A:
Net income
2018 50000
2019 (69000-19000) 50000
2020 (69000-19000) 50000
2021 (69000-19000) 50000
200000
Balance in retained earnings=$ 200000
Company B:
Net income
2018 29000
2019 (69000-20000) 49000
2020 (69000-10000) 59000
2021 (69000-5000) 64000
201000
Balance in retained earnings=$ 201000
Company C:
Net income
2018 45600
2019 (69000-16500) 52500
2020 (69000-15000) 54000
2021 (69000-21000) 48000
200100
Balance in retained earnings=$ 200100
d-2. Htghest amount of retained earnings reported by Company B
E. Cashflow from operating activities will be same for 3 companies since cashflow from operating activities will involve only cash revenue.Does not consider depreciation

ekkarill92 answered 1 year ago
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