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7 April, 09:06

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.

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Answers (2)
  1. 7 April, 09:12
    0
    a. Non - Current Asset

    b. Depreciation Charge = $8,000

    Explanation:

    Straight Line method charges the same amount of depreciation on the asset over its useful life.

    Depreciation Charge = (Cost - Salvage Value) / Number of Useful Life

    = ($95,000 - $15,000) / 10

    = $8,000
  2. 7 April, 09:24
    0
    a.

    9 recovery period years class

    b.

    $8,889 per year

    Explanation:

    a.

    Buses are 9 years recovery period class, in which it is depreciated using historical method and it has 5 years GDS class life.

    b.

    Straight Line depreciation is a method of depreciation in which the cost of the asset net of residual value is divided over useful life.

    We will depreciate this asset for only 9 years because it has 9 years class, even it will be kept for 10 years but the depreciation charged for 9 years.

    Depreciation rate = (Cost - Salvage Value) / useful life = ($95,000 - $15,000) / 9 = $8,889

    Depreciation charged in 2018 = $19,500
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