Tasty Tongue Pizza bought a used Nissan delivery van on January 2, 20X6, for $23,000. The van was expected to remain in service for four years (184,000 miles). At the end of its useful life, Tasty Tongue's officials estimated that the van's residual value would be $4,600. The van traveled 60,000 miles the first year, 63,000 miles the second year, 11,000 miles the third year, and 50,000 miles in the fourth year. 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. Units-of- Double-Declining- Year Straight-Line Production Balance 20X6 20X7 20X8 20X9 Total Requirement 2. Which method best tracks the wear and tear on the van? The method tracks the wear and tear on the van most closely. Requirement 3. Which method would Tasty Tongue prefer to use for income tax purposes? Explain in detail why Tasty Tongue prefers this method. For income tax purposes, Tasty Tongue would prefer the provides the depreciation and, thus, the method because it tax deductions in the early life of the asset.
Tasty Tongue Pizza bought a used Nissan delivery van on January 2, 20X6, for $23,000. The van was expected to remain in service for four years (184,000 miles). At the end of its useful life, Tasty Tongue's officials estimated that the van's residual value would be $4,600. The van traveled 60,000 miles the first year, 63,000 miles the second year, 11,000 miles the third year, and 50,000 miles in the fourth year. 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. Units-of- Double-Declining- Year Straight-Line Production Balance 20X6 20X7 20X8 20X9 Total Requirement 2. Which method best tracks the wear and tear on the van? The method tracks the wear and tear on the van most closely. Requirement 3. Which method would Tasty Tongue prefer to use for income tax purposes? Explain in detail why Tasty Tongue prefers this method. For income tax purposes, Tasty Tongue would prefer the provides the depreciation and, thus, the method because it tax deductions in the early life of the asset.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Tasty Tongue Pizza bought a used Nissan delivery van on January 2, 20X6, for $23,000. The van was
expected to remain in service for four years (184,000 miles). At the end of its useful life, Tasty Tongue's
officials estimated that the van's residual value would be $4,600. The van traveled 60,000 miles the first year,
63,000 miles the second year, 11,000 miles the third year, and 50,000 miles in the fourth year.
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.
Units-of-
Double-Declining-
Year
Straight-Line
Production
Balance
20X6
20X7
20X8
20X9
Total
Requirement 2. Which method best tracks the wear and tear on the van?
The
method tracks the wear and tear on the van most closely.
Requirement 3. Which method would Tasty Tongue prefer to use for income tax purposes? Explain in detail
why Tasty Tongue prefers this method.
For income tax purposes, Tasty Tongue would prefer the
provides the
depreciation and, thus, the
method because it
tax deductions in the early life of the asset.
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