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Depreciation - Financial Reporting and Tax Considerations

# Depreciation - Financial Reporting and Tax Considerations -...

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Depreciation: Financial Reporting and Tax Considerations On January 1, 20X1, Crimson Company purchased 3 used delivery trucks at a total cost of\$53,000 . Before placing the trucks in service, the company spent \$1200 painting them, \$1800 replacing tires and \$4000 overhauling their engines and reconditioning their bodies. Crimson management estimates that the trucks will remain in servic~6 years and have a residual value of \$6,000. The trucks' combined annual mileage is expected to be 16,000 miles in each of the first 4 years and 18 ,000 miles in each of the next 2 years. Management is attempting to decide what depreciation method to use. 1) Calculate depreciation expense for years one and two for the straight-line, units of production and double declining balance methods. S{rci\~ Ct r .L. P D~ \J r ~ 9.:L'O ~ t : 2o,wo ~ 2 -: q I "() ~ k -; l'b 13? 3 Unr\S ot~iY .t Ll~ \) ( ~ <b,&Lto ~'L~ <6~0 2) Show how the trucks would be reported on the balance sheet at the end of year 2 for each three methods.

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