Montezuma Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3114 and is expected to be driven for eight years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After three years of recording depreciation, Montezuma determines that the delivery truck will only be useful for another three years and that the salvage value will increase to $4114. Determine the depreciation expense for the final three years of the asset's life, and create the journal entry for year four.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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8. Montezuma Inc. purchases a delivery truck for $15,000. The truck has a salvage value of
$3114 and is expected to be driven for eight years. Montezuma uses the straight-line
depreciation method. Calculate the annual depreciation expense. After three years of
recording depreciation, Montezuma determines that the delivery truck will only be
useful for another three years and that the salvage value will increase to $4114.
Determine the depreciation expense for the final three years of the asset's life, and
create the journal entry
for
year
four.
Transcribed Image Text:8. Montezuma Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3114 and is expected to be driven for eight years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After three years of recording depreciation, Montezuma determines that the delivery truck will only be useful for another three years and that the salvage value will increase to $4114. Determine the depreciation expense for the final three years of the asset's life, and create the journal entry for year four.
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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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