Question

A bus was purchased and placed in service. It costs $35000 with a trade in of the old bus which is valued at $15000. The new bus has an estimated MV (market value) of $10000 at the end of an estimated useful life of 9 years. Compute the depreciation amount in 4th year (d) and the BV at the end of the eighth year (V) of life using each of the GDS and ADS method. Round your answer to the nearest Integer. d4(GDS) =_ BV8(GDS) - - 04(ADS) =_ BV8(ADS)-

Answer 1

Historical cost of newbus =35000$

Book value of old bus=15000$

Estimated useful life of new bus is 9years

Residual value of new bus after 9years is 10000$

Depreciation under GDS...after four years

Depreciation =(cost of asset - salvage value)/estimated life of asset

=35000$-10000$/9years

=25000$/9years

=2777.78$ for year four

Book value of asset at year 8=book value of asset-depreciation of 7 years

Therefore book value of asset at year 8=35000$-annual depreciation×7years

35000$-2777.78×7years=35000$-19444.46

Depreciation under alternative depreciation system

Under alternative depreciation system the depreciation in recent years are more so....

Depreciation for year 04=under some of years digit method

Depreciation for year 04=25000$×(6)/45=3333.330$

Book value of asset after 8years∆=35000$ 25000$/45×(9+8+7+6+5+4+3)

=35000$-23333.33$

=16667.77∆$