Question

Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $12,000. They expect to use the Suburban for five years and then sell the vehicle for $4,500. The following expenditures related to the vehicle were also made on July 1, 2022: The company pays $1,800 to GEICO for a one-year insurance policy. The company spends an extra $3,000 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides. An additional $2,000 is spent on a deluxe roof rack and a trailer hitch. The painting, roof rack, and hitch are all expected to increase the future benefits of the vehicle for Great Adventures. In addition, on October 22, 2022, the company pays $400 for basic vehicle maintenance related to changing the oil, replacing the windshield wipers, rotating the tires, and inserting a new air filter.

3. Prepare a depreciation schedule using the straight-line method.

Answer 1

	Purchase Price	$12,000
	Add:Painting of vehicle	$3,000
	Add:Deluxe roof back	$2,000
	Cost of New vehicle	$17,000
	Depreciable cost of asset =$17,000 - $4,500 =$12,500
Straight Line
Date	Cost of asset	Depreciable cost	Useful life	Depreciation rate	Depreciation expenses	Accumulated Depreciation	Book value
Year 1-6 months	$17,000	$12,500	5 Years	0.10	$1,250	$1,250	$15,750
Year 2	$17,000	$12,500	5 Years	0.20	$2,500	$3,750	$13,250
Year 3	$17,000	$12,500	5 Years	0.20	$2,500	$6,250	$10,750
Year 4	$17,000	$12,500	5 Years	0.20	$2,500	$8,750	$8,250
Year 5	$17,000	$12,500	5 Years	0.20	$2,500	$11,250	$5,750
Year 6-6 months	$17,000	$12,500	5 Years	0.10	$1,250	$12,500	$4,500