##### Question

In: Civil Engineering

# 2. The La Salle Bus Company has decided to purchase a new bus for $95,000 with... 2. The La Salle Bus Company has decided to purchase a new bus for$95,000 with a trade-in of their old bus. The old bus has a BV of $10,000 at the time of the trade-in. The new bus will be kept for 10 years before being sold. Its estimated SV at that time is expected to be$15,000.

a. Determine which asset class of the bus.
b. Determine annual Straight-Line Depreciation charge.

## Solutions

##### Expert Solution

The straight-line depreciation for the bus would be calculated as follows:

1. Cost of the asset: $95,000 2. Cost of the asset – Estimated salvage value:$95,000 – $15,000 =$80,000 total depreciable cost
3. Useful life of the asset: 10 years
4. Divide step (2) by step (3): $80,000 / 10 years =$8,000 annual depreciation amount

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