Question

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, 2019 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 2019 calendar tax year using the conventional (for financial accounting purposes) straight-line depreciation method?

Answer 1

Answer:

$3200

Explanation:

The depreciation expense under the conventional straight line depreciation will be calculated using the following formula:

Straight-line Depreciation = (Cost - Scrap Value) / Useful Life

The useful life here is 5 years, cost is $24000 and scrap value is $0 which can be calculated using the following formula:

Straight-line Depreciation = ($24,000 - 0) / 5 Years = $4800 per year

This is for a year and we need  for the year end 31 December, 2019 for eight months.

The per month depreciation charge = $4800 / 12 = $400 per month

For 8 months = $400 * 8 months = $3200