The Vermont Construction Company purchased a hauling truck on January 1, 2009 at a costof $35,000. The truck has a useful life of eight yearswith an estimated salvage value of $6,000. Thestraight-line method is used for book purposes. Fortax purposes, the truck would be depreciated with theMACRS method over its five-year class life. Determine the annual depreciation amount to be taken overthe useful life of the hauling truck for both book andtax purposes
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.
The Vermont Construction Company purchased a hauling truck on January 1, 2009 at a cost
of $35,000. The truck has a useful life of eight years
with an estimated salvage value of $6,000. The
straight-line method is used for book purposes. For
tax purposes, the truck would be
MACRS method over its five-year class life. Determine the annual depreciation amount to be taken over
the useful life of the hauling truck for both book and
tax purposes
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