Question

Brock Florist Company buys a new delivery truck for $28,000. It is classified as a​ light-duty truck. the tax rate is 0.25

a. Calculate the depreciation schedule using a​ five-year life and MACRS depreciation.

b. Calculate the remaining book value at the end of year 4 and the termination value​ (aka. cost recovery or after tax salvage​ value) for the delivery truck if the truck can be sold at the end of year 4

​for$4 comma 0004,000.

a.  Calculate the depreciation schedule using a​ five-year life and MACRS depreciation.​ (Round to the nearest​ dollar.)

	Annual Depreciation
Year 1	​$
Year 2	​$
Year 3	​$
Year 4	​$
Year 5	​$
Year 6	​$

b. Calculate the remaining book value at the end of year 4 and the termination value​ (aka. cost recovery or after tax salvage​ value) at the end of year 4 for the delivery truck.

Remaining book value at the end of year 4 is $4,839​(Round to the nearest​ dollar.)

Answer 1

The five-year life MACRS depreciation rates are 20%, 32%, 19.20%, 11.20%, 11.20% and 5.76% per the year1, year2, year3, year4, year 5 and year 6 respectively.

(a)-Depreciation schedule using a​ five-year life and MACRS depreciation

Years	Annual Depreciation
Year 1	5,600.00
Year 2	8,960.00
Year 3	5,376.00
Year 4	3,225.60
Year 5	3,225.60
Year 6	1,612.80

Depreciation for Year 1 = $5,600.00 [$28,000 x 20%]

Depreciation for Year 2 = $8,960.00 [$28,000 x 32%]

Depreciation for Year 3 = $5,376.00 [$28,000 x 19.20%]

Depreciation for Year 4 = $3,225.60 [$28,000 x 11.52%]

Depreciation for Year 5 = $3,225.60 [$28,000 x 11.52%]

Depreciation for Year 6 = $1,612.80 [$28,000 x 5.76%]

(b)-Remaining book value at the end of year 4

Remaining book value at the end of year 4 = Cost of the Truck – Accumulated Depreciation at the end of Year 4

= $28,000 – [$5,600.00 + $8,960.00 + $5,376.00 + $3,225.60]

= $28,000 - $23,161.60

= $4,838.40