Question

The Vermont Construction Company purchased a truck on January 1, 2009 at a cost of $35000. The truck has a useful life of eight years with an estimated salvage value of $6000. The straight-line method is used for book purposes, for tax purposes the track would be depreciated with the MACRS method over its five-year useful life. Determine the depreciation amount to be taken over the useful life of the having truck for both and tax purposes.

Answer 1

	BOOK PURPOSE DEPRECIATION
	Cost of truck	$35,000
	Useful life in years	8
	Estimated salvage Value	$6,000
	Annual Depreciation	$3,625	(35000-6000)/8
	TAX PURPOSE DEPRECIATION:
	Cost of asset	$35,000
		A	B=A*35000
		MACRS -5 year	MACRS Depreciation	Book Purpose
	Year	Depreciation rate	Amount(tax purpose)	Depreciation
	1	20%	$7,000	$3,625
	2	32%	$11,200	$3,625
	3	19.20%	$6,720	$3,625
	4	11.52%	$4,032	$3,625
	5	11.52%	$4,032	$3,625
	6	5.76%	$2,016	$3,625
	7	0%	$0	$3,625
	8	0%	$0	$3,625