Question

Brock Florist Company buys a new delivery truck for $36,000. It is classified as a light-duty truck. the tax rate is 0.3 a. Calculate the depreciation schedule using a five-year lfe and MACRS depreciation. b. Calculate the remaining book value at the end of year 4 and the termination value (aka. cost recovery or after tax salvage value) for the delivery truck if the truck can be sold at the end of year 4 for$2,000. a. Calculate the depreciation schedule using a five-year life and MACRS depreciation. (Round to the nearest dollar) Annual Depreciation Year 1 Year 2 Year 3 Year 4 Inco Year 5 Year 6 b. Calculate the remaining book value at the end of year 4 and the termination value (aka. cost recovery or after tax salvage value) at the end of year 4 for the delivery truck Remaining book value at the end of year 4 is $6,221(Round to the nearest dollar ) The termination value (cost recovery or after tax salvage value) at the endo of year 4 is $3,266 (Round to the nearest dollar.)

Answer 1

Part (a)

Please see the table below. Please be guided by the third row to understand the mathematics. The column highlighted in yellow contains your answer. Figures in parenthesis, if any, mean negative values. All financials are in $.

Cost	A	36,000
Year	Depreciation rate	Annual Depreciation ($)	Remaining book Value ($)
	dt	Dt = A x dt	A - Cumulative Dt
1	20.00%	7,200	28,800
2	32.00%	11,520	17,280
3	19.20%	6,912	10,368
4	11.52%	4,147	6,221
5	11.52%	4,147	2,074
6	5.76%	2,074	-

Part (b)

Remaining book value at the end of year 4 = 6,221 (the last column, value corresponding to year 4)

And the termination value at the end of year 4 = Post tax salvage value = Sale value - tax on gain = Sale Value - (Sale value - Remaining book value) x tax rate = 2,000 - (2,000 - 6,221) x 0.3 = $  3,266