Reference no: EM132594104
Question - Three different companies each purchased trucks on January 1, Year 1, for $62,000. Each truck was expected to last four years or 250,000 miles. Salvage value was estimated to be $2,000. All three trucks were driven 80,000 miles in Year 1, 55,000 miles in Year 2, 51,000 miles in Year 3, and 70,000 miles in Year 4. Each of the three companies earned $53,000 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.
Required -
a-1. Calculate the net income for Year 1.
a-2. Which company will report the highest amount of net income for Year 1?
b-1. Calculate the net income for Year 4.
b-2. Which company will report the lowest amount of net income for Year 4?
c-1. Calculate the book value on the December 31, Year 3, balance sheet.
c-2. Which company will report the highest book value on the December 31, Year 3, balance sheet?
d-1. Calculate the retained earnings on the December 31, Year 4, balance sheet.
d-2. Which company will report the highest amount of retained earnings on the December 31, Year 4, balance sheet?
e. Which company will report the lowest amount of cash flow from operating activities on the Year 3 statement of cash flows?
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