Question

A tractor for over-the-road hauling is purchased for $80,000.00. It is expected to be of use to the company for 6 years, after which it will be salvaged for $3,600.00. 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

	Tractor Value		$          80,000.00
	Life		6 year
	Salvage Value	$            3,600.00
	a. straight-line depreciation
	= Purchase Cost- Salvage Value/Life
	$ 12,733.33	= for one Year
	On 6th Year
	Depreciation =	$          12,733.33
	Book Value=	$          16,333.33
	b. WDV method
	Year	WDV	Depreciation
	1	$ 80,000.00	32,288.23
	2	$ 47,711.77	19,256.61
	3	$ 28,455.16	11,484.59
	4	$ 16,970.57	6,849.37
	5	$ 10,121.20	4,084.95
	6	$    6,036.26	2,436.25
	Salvage	$    3,600.01
	On 6th Year
	Depreciation =	$            2,436.25
	Book Value=	$            6,036.26
c.	Depreciation =	Nill
	Book Value=	$            3,600.00
b.	Depreciation =	Nill
	Book Value=	$            3,600.00