Question

Please how do i calculate this problem. An asset was purchased for $150,000. It had an estimated salvage value of $30,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $24,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in 6 years would be?

Answer 1

For the first 5 years,
annual depreciation = (150,000 - 30,000)/10 = 12,000 / year
total depreciation after first 5 years
= 60,000
Residual value = 150,000 - 60,000
= 90,000
New salvage value after the 5th year
= 24,000
New annual depreciation as of the sixth year
=(90,000-24,000)/5
=13,200

Answer 2

A company purchased a truck for $50,000 on July 1, 2009. The truck has an estimated
useful life of 5 years and will have no salvage value. It is estimated that the truck can be driven for 150,000 miles. The truck was driven for 18,000 miles during 2009. If the goal is to reduce taxable income to the lowest amount, which method should be elected and how much depreciation can be deducted in 2009?