Question

Three different companies each purchased trucks on January 1, 2018, for $82,000. Each truck was expected to last four years or 250,000 miles. Salvage value was estimated to be $6,000. All three trucks were driven 79,000 miles in 2018, 56,000 miles in 2019, 51,000 miles in 2020, and 71,000 miles in 2021. Each of the three companies earned $71,000 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 2018? (Round

	Net Income
Company A	$52,000
Company B
Company C

Answer 1

	Company A
	Straight line method
	Depreciation = (82000-6000)/4	19000
	Cash revenue	71000
Less	Depreciation	19000
	Net income	52000
	Company B
	Double declining method = 1*200%/4	50%
	Depreciation = 82000*50%	41000
	Cash revenue	71000
Less	Depreciation	41000
	Net income	30000
	Company C
	Depreciation per mile = (82000-6000)/250000	0.304
	For 2018 .304*79000	24016
	Cash revenue	71000
Less	Depreciation	24016
	Net income	46984