City Taxi Service purchased a new auto to use as a taxi on January 1, 2018,...

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City Taxi Service purchased a new auto to use as a taxi on January 1, 2018, for $28,500. In addition, City paid sales tax and

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Answer 1

Answer #1

a.When an asset is purchased all the costs that are incurred to bring asset into working condition are capitalised into the cost of an asset.

Total cost = $28,500+$600

=$29,100

depreciation (straight line method) per year=[Cost-salvage]/useful life

=[$29,100-$5,960]/5

=$4,628


2018 depreciation	$4,628 per year
2019	$4,628 per year

b.book value as on January 2020

=cost-depreciation upto 2019 December

=$29,100-$4,628-$4,628

=$19,844

Gain(loss) = Sale value-Book value

=$22,821-$19,844

=$2,977 Gain

profit on sale $2,977

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Answer 2

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