Question

Question 13 A tractor for over-the-road hauling is purchased for $85,000.00. It is expected to be of use to the company for 6 years, after which it will be salvaged for $3,400.00. Calculate the depreciation deduction and the unrecovered investment during each year of the tractors life. a. Use straight-line depreciation. Provide depreciation and book value for year 6. Depreciation for year 6 = $ book value for year 6 = $ b. Use declining-balance depreciation, with a rate that ensures the book value equals the salvage value. Provide depreciation and book value for year 6. Depreciation for year 6 = $ book value for year 6 = $_ c. Use double declining balance depreciation. Provide depreciation and book value for year 6. Depreciation for year 6 = $ book value for year 6 = $. d. Use double declining balance, switching to straight-line depreciation. Provide depreciation and book value for year 6. Depreciation for year 6 = $ book value for year 6 = $

Answer 1

	Asset Value		85000
	Life of the Asset		6
	Salvage Value		3400
	Depreciable Value for 6 years		81600	13600
	Depreciable value for 1 year		13600
1	Straight Line Method
	Years	GrossAsset Value	Depreciation	Net Asset Value
	1	85000	13600	71400
	2	71400	13600	57800
	3	57800	13600	44200
	4	44200	13600	30600
	5	30600	13600	17000
	6	17000	13600	3400
	Depreciation for year 6	13600
	Book Value	3400
2	Declining Method
	Years	GrossAsset Value	Depreciation	Net Asset Value
	1	85000	14167	70833
	2	70833	11806	59027
	3	59027	9838	49189
	4	49189	8198	40991
	5	40991	6832	34159
	6	34159	5693	28466
	Depreciation for year 6	5693
	Book Value	7462
3	Double Decling Method
	Years	GrossAsset Value	Depreciation	Net Asset Value
	1	85000	28334	56666
	2	56666	18888	37778
	3	37778	12592	25186
	4	25186	8396	16790
	5	16790	5596	11194
	6	11194	3732	7462
	Depreciation for year 6	3732
	Book Value	7462
4	Using the double Decline Method , Switching the Straight line Method
	After 1st year switching to Straight line menthod
	Asset Value at year 2	56666
	Salvage Value	3400
	Depreciation	10653.2
	Years	GrossAsset Value	Depreciation	Net Asset Value
	1	85000	28334	56666
	2	56666	10653	46013
	3	46013	10653	35360
	4	35360	10653	24707
	5	24707	10653	14054
	6	14054	10653	3401
	Depreciation for year 6	10653
	Book Value	3400