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CHAPTER 10
Cookie Creations
(Note: This is a continuation of the Cookie Creations from Chapters 1 through 9.)
CC10 Natalie is also 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 additional $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, 2017, and it will be ready for use on September 1, 2017.
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.
Instructions
(a) Determine the cost of the van.
(b) Prepare three depreciation tables for 2017, 2018 and 2019: one for straight-line
depreciation (similar to the one in Illustration 10-10), one for double-declining
balance depreciation (Illustration 10-14), and one for units-of-activity depreciation
(Illustration 10-12). For units-of-activity, Natalie estimates she will drive the van as
follows: 15,000 miles in 2017; 45,000 miles in 2018; 50,000 miles in 2019; 50,000
miles in 2020; and 40,000 miles in 2021. Recall that Cookie Creations has a
