Cork Oak Corporation purchased a heavy-duty truck (not considered a passenger automobile for purposes of the listed property and luxury automobile limitations) on May 1, 2018 for use in its business. The truck, with a cost basis of $24,000, has a 5-year estimated life. It also is 5-year recovery property. How much depreciation should be taken on the truck for the 2018 calendar tax year using the conventional (for financial accounting purposes) straight-line depreciation method?

Question

Kaya Baldwin

Business

11 June, 05:12

Cork Oak Corporation purchased a heavy-duty truck (not considered a passenger automobile for purposes of the listed property and luxury automobile limitations) on May 1, 2018 for use in its business. The truck, with a cost basis of $24,000, has a 5-year estimated life. It also is 5-year recovery property. How much depreciation should be taken on the truck for the 2018 calendar tax year using the conventional (for financial accounting purposes) straight-line depreciation method?

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Giovanna Farrell · Answer 1

Answer: Cost of truck / expected useful life = 24,000 / (5 year * 12 months) = 400 dollar per month 400*8 = 3200 dollar

Explanation:

Considering no salvage value of the truck at the end of the 5-year period and need for 8 month period of depreciation (from May 1 till the end of the year) we use formula of straight line method: Cost of truck / expected useful life = 24,000 / (5 year * 12 months) = 400 dollar per month. And in order to find taken accumulated depreciation for 8 months of 2018: 400*8 = 3200 dollar. At the end of 2018 we should write off 3200 dollar from the value of truck.