Answer:
Rainbow Company
The percentage depreciation Rainbow will use is:
= 40%
Explanation:
a) Data and Calculations:
Purchase (list) price = $31,000
Cash discounts = (3,000)
Additional interior cost 5,000
Net purchase price = $33,000
Salvage value = (5,000)
Depreciable amount = 28,000
Estimated useful life = 5 years
Double-declining-balance method of depreciation:
Depreciation rate = 100/5 * 2 = 40%
Estimated usage for the car = 140,000 miles
Annual usage:
Year 1 = 20,000
Year 2 = 30,000
Year 3 = 40,000
Year 4 = 30,000
Year 5 = 20,000
January 1, 2026 sales proceeds = $6,000
