On January 1, 2010, the Super Fast Subs Company purchased a delivery automobile for $31,000. The estimated

Question:

On January 1, 2010, the Super Fast Subs Company purchased a delivery automobile for $31,000. The estimated useful life of the vehicle is five years, and the estimated salvage value is $1,000. The company expects the automobile to be driven 200,000 miles during its service life. Actual miles driven were:

Requirements

1. Calculate the depreciation expense for each year of the five-year life of the automobile using the following methods. (Round your answers to the nearest dollar.)

a. Straight-line method

b. Double-declining balance method

c. Activity method

2. How does the choice of depreciation methods affect net income in each of the years? How does the choice of depreciation methods affect the balance sheet in each of the years?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...