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ACC 121-Accounting Pikes Peak Community College-M5COMP.docx

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Cookie Creations 10 a-b,c,e (Part Level Submission) Natalie is thinking of buying a van that will be used only for business. The cost of the van is estimated at $36,500. Natalie would spend an addit ... ional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last about 5 years, and she expects to drive it for 200,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $7,500. Assume that she will buy the van on August 15, 2020, and it will be ready for use on September 1, 2020. Natalie is concerned about the impact of the van’s cost on her income statement and balance sheet. She has come to you for advice on calculating the van’s depreciation. (a) Determine the cost of the van.Prepare three depreciation tables for 2020, 2021 and 2022: one for straight-line depreciation (similar to the one in Illustration 10-9), one for double-declining balance depreciation (Illustration 10-10), and one for units-of-activity depreciation (Illustration 10-11). For units-of-activity, Natalie estimates she will drive the van as follows: 15,000 miles in 2020; 45,000 miles in 2021; 50,000 miles in 2022; 50,000 miles in 2023; and 40,000 miles in 2024. Recall that Cookie Creations has a December 31 year-end. (Round depreciation cost/unit to 3 decimal places, e.g. 0.225.) [Show More]

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