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question p walker industries leases speciality and unique automobiles for use to fil 4292384

Question

P. Walker Industries leases speciality and unique automobiles for use to film production companies. On January 01, 2013 Walker purchased a $419,000 enclosed car transport vehicle (18-wheeler with a two level enclosed trailer) to deliver custom and high-profile automobiles to movie sets without the prying eyes of onlookers.

Please indicate which of the following methods will yield the GREATEST tax benefit in the first full year of operation (year ending December 31, 2013).

A.

Option 1: Walker calculates depreciation on units-of-production (vehicle miles) method with no estimated salvage vlaue based on total estimated miles of 500,000 over the lifetime of the vehicle. For 2013 the truck traveled 67,800 miles.

B.

Option 2: Walker uses the straight line method of depreciation with a $20,000 salvage value at the end of seven years.

C.

Option 3:  Walker uses the declining-balance method over a seven year useful life.

D.

Option 4: Walker should not bother with depreciation but should expense the asset immediately.

 

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