Tony and Suzie see the need for a rugged all-terrain vehicle to transport partic
ID: 2464181 • Letter: T
Question
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban. The cost of the Suburban is $11,200. The vehicle is purchased in late June and will be put into use on July 1, 2016. Annual insurance from GEICO runs $1,700 per year. The paint is starting to fade, so they spend an extra $2,800 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides. An additional $1,800 is spent on a deluxe roof rack and a trailer hitch. The painting, roof rack, and hitch are all expected to increase the future benefits of the vehicle for Great Adventures. They expect to use the Suburban for five years and then sell the vehicle for $4,300.
Determine the amount that should be recorded for the new vehicle then prepare a depreciation schedule using the straight-line method.
Explanation / Answer
Purchase cost of the Suburban 11200 Year W.D.V Depreciation O/s Repaint Cost 2800 1 11500 2300 9200 Deluxe roof rack and a trailer hitch 1800 2 9200 2300 6900 Capitalized Value of Suburban 15800 3 6900 2300 4600 Salvage Value 4300 4 4600 2300 2300 Depreciable Amount 11500 5 2300 2300 0 No of Useful Life in years 5 Depreciation per year as per Straight line method =11500/5 Depreciation per year as per Straight line method 2300