A Your company has purchased a large new tractor trailer truck (heavy-duty truck). It has a basic cost of $180,000 with additional options costing $20,000, so the cost basis for depreciation purpose is $200,000. Its market value at the end of 5 years is estimated as $30,000 and it will be depreciated under the ADS with straight line depreciation. (A heavy-duty truck has life of 6 years under ADS, but assume 5 years for this problem.) (a) What is the cumulative depreciation through the end of the 3rd year? (b) What is the MACRS-ADS depreciation in the 4th year? (c) What is the book value at the end of the 2nd year?

A Your company has purchased a large new tractor trailer truck (heavy-duty truck). It has a basic cost of $180,000 with additional options costing $20,000, so the cost basis for depreciation purpose is $200,000. Its market value at the end of 5 years is estimated as $30,000 and it will be depreciated under the ADS with straight line depreciation. (A heavy-duty truck has life of 6 years under ADS, but assume 5 years for this problem.) (a) What is the cumulative depreciation through the end of the 3rd year? (b) What is the MACRS-ADS depreciation in the 4th year? (c) What is the book value at the end of the 2nd year?

Name: A Your company has purchased a large new tractor trailer truck (heavy
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Description: A Your company has purchased a large new tractor trailer truck (heavy-duty truck). It hasa basic cost of $180,000 with additional options costing $20,000, so the cost basis fordepreciation purpose is $200,000. Its market value at the end of 5 years

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

A Your company has purchased a large new tractor trailer truck (heavy-duty truck). It has
a basic cost of $180,000 with additional options costing $20,000, so the cost basis for
depreciation purpose is $200,000. Its market value at the end of 5 years is estimated as
$30,000 and it will be depreciated under the ADS with straight line depreciation. (A
heavy-duty truck has life of 6 years under ADS, but assume 5 years for this problem.)
(a) What is the cumulative depreciation through the end of the 3rd year?
(b) What is the MACRS-ADS depreciation in the 4th year?
(c) What is the book value at the end of the 2nd year?
(d) What is the book value at the end of the 5th year?

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