VanLyfe was founded by Marc Roberts, an entrepreneur, mountain biker, and all-around adventure junkie. Marc started VanLyfe to help others get into the lifestyle by renting out camper vans for cross-country travel. To start the business, Marc raised $50,000 cash through the issuance of common stock to cover basic operating expenses. Marc also took out a loan of $120,000 to purchase his first van for rent. Marc estimates that the van will have a useful life of 10 years, can be driven up to 200,000 miles, and will have a $20,000 salvage value at the end of its life. Marc intends to charge customers based on the number of days they rent the van and the total mileage driven.

Marc is trying to decide which depreciation method to use when accounting for the van, and has prepared the Tableau Dashboard below to assist him in his decision making. The visualization summarizes the accounting effects of three different methods of depreciation; double-declining, units of production (unit of measure is miles driven), and straight line. The three bar charts at the top show the impact that each method will have on the balances sheet over the useful life of the van. You can see these effects over time by using the “Year” slider at the top right corner of the visualization. The three line charts at the bottom show the balance in the accumulated depreciation account over the life of the van. Note that all other business events have been held constant over time to show only the impact of depreciation on the balance sheet over time. To assist Marc in his decision making, use the visualization to answer the following questions:

1. Under which method of depreciation will the book value of the van at the end of its useful life be lowest? (Hint: Use the “Year” slider to compare the balances sheets across all three methods at the end of the van’s useful life.)
2. Which method of depreciation is depicted by Depreciation Method 2 in the visualization?
3. Which method of deprecation makes the assumption that the van will wear down evenly over the course of its lifetime?
4. Depreciation Method 3 represents the units of production method as shown by the inconsistent change in the book value of the van over its useful life and the inconsistent trend in accumulated depreciation line chart. Based on the visualization, in which year did the rental van incur the most miles driven?
5. Based on the nature of VanLyfe’s business, which method of depreciation should Marc choose to best match the depreciation expense recognized on the rental van to the revenues earned from the van?