Homework Answers
| a. | Year 1 Depreciation | $ 3,652 | per year |
| Year 2 Depreciation | 3652 | per year | |
| b. | Gain | on sale | $ 2,563 |
Calculated as
| Straight line method- Calculation of Depreciation and gain on sale of Taxi | ||
| Capitalized Cost of Taxi = $22900+$1490 = | $ 24,390 | |
| Life of Assets | 5 | years |
| Residual value | $ 6,130 | |
| Depreciation = (Cost-Residual Value)/Life years | (24390-6130)/5 | |
| =18260/5 = | $ 3,652 | Per year |
| Depreciation every year | $ 3,652 | |
| Accumulated Depreciation upto end of 2rd year = $3652+3652 = | $ 7,304 | |
| Book Value at the end of January 1 year 3 = $24390-7304 | $ 17,086 | |
| Sale Value | $ 19,649 | |
| Gain on sale of = $22800-19826= | $ 2,563 | |
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