Roberto Trucks Inc. purchased a delivery van on April 1, 2018. Assume this van was the company’s only capital asset and that the company uses the nearest whole month rule in the year of acquisition and disposal for straight-line and double-declining balance depreciation methods. The following information is available.
Estimated useful life 8 years or 150,000 kms
The truck was driven 20,000 km in 2018.
Residual value $1,000
Required: 1. Calculate the depreciation for 2018 under each of the following methods: a. Usage b. Straight-line c. Double-declining balance
2. Compare the depreciation expense and carrying amount for 2018 under each of these methods. 3. If one of management’s objectives is to maximize 2018 net income, what method should be adopted?