Question

A delivered price (including attachments) of a crawler dozer tractor is $186,900 with a residual value of 40%. The useful life of the tractor is 8,900 hours.

a. What is total amount of depreciation allowed?

b. What is the amount of depreciation per hour?

c. If the tractor is operated five days a week for an average of 7.25 hours a day, what would be the depreciation for the first year?

d. If the hours of operation were the same each year, what would be the total number of years of useful life for the tractor?

If corporate headquarters for UPS in Atlanta is considering adding to its 96,000 + fleet of delivery vans, what is year 5’s depreciation expense using MACRS if one van costs $78,500?

What is the depreciation expense?

Answer 1

a. Total amount of depreciation = Delivered price - residual value = 186900 -0.48186900 = 186900-74760 = 112140 b. Depreciation per hour = = Total depreciation Total useful life in hours. 112140 8900 12.6 = - C. Depreciation for the year - Depreciation per hour x Operating hours in a weeky number of weeks in a year = 12.6 x 7.25×5 x 52 [Assuming 52 weeks in the year] = 23751 d. Total useful life = Total amount et depreciation Depreciation for a year Given that the hours of operation are same each year]

= 112140 23751 = 4.72 years