Question

Assume Farmer Fiona bought a new compact track loader (CTL) and placed it in service March 30, 2019. Total cost for the CTL was $45,000. She estimates that the useful life of this item will be 5 years and will have a salvage value of $5,000. Calculate the first year depreciation for this item (the amount for 2019) and the book value of this item as of December 31, 2019. Use the Straight Line Method. What would the last year's annual depreciation be for this asset? Lastly, how many years will it take to fully depreciate this item? Edit Insert Format Tools Table 12pt Paragraph BIV AET B O words

Answer 1

Calculation of Depreciation for Year 2019

Depreciation as per SLM

=( Cost - Salvage value)/Useful Life

=( 45000 -5000)/5 =8000

Depreciation for First Year i.e for Year 2019

=8000*9/12 =6000

Book Value as on 31st December 2019

=45000 -6000 =39000

Last Year's Annual Depreciation

= 8000*3/12 =2000

Years took to fully depreciate the asset

= 6 years ( since asset was placed in service as on March 30, 2019, hence it will be fully depreciated in year March 30, 2025)