On January 7, Red Tucker, Inc, paid $254,700 for equipment used in manufacturing automotive supplies. In addition to the basic pruchase price, the company paid $500 transportation charges, $300 insurance for the equipment while in transit, $12,000 SALES TAX, AND $2,500 for a special platform on which to place the equipment in the plant. Red Tucker, Inc managment estimates that the equipment willl remain in service for five years and have a residual value of $30,000. The equipment will produce 60,000 units the first year, with annual production decreasing by 5,000 units during each of the next four years. In trying to decide which depreciation method to use, Red Tucker, INC requested a depreciation schedule for each of the three depreciation methods(straight line, units of production and double declining balance.)
For each depreciation method, prepare a depreciation schedule showing asset cost, depresciation expense, accumlated depreciation, and asset book value. For the units of production method, round depreciation per unit to three decimal places.
Red tucker, Inc, prepares finanical statements using the depreciation method that reports the highest income in the early years of asset use. For income tax purposes, the company uses the depreciation method that minimizes income taxes in the early years. consider the first year Red Tucker , INC, uses the equipment. Identift trhe depreciation method that meets Reeds Tuckers objectives, assuming the income tax authorities permit the use of any method.
Prepare the balance sheet disclousure for Red Tuckers equipmetn at the DEC 31 of the first year