Question

on January 1, Year 1, Your Ride Inc. paid $36,000 cash to purchase a taxi cab. The taxi had a four-year useful life and a $4,000 salvage value. Required a. Determine the amount of depreciation expense that would appear on the Year 1 and Year 2 income statements. b. Determine the amount of accumulated depreciation that would appear on the Year 1 and Year 2 balance sheets.

Answer 1

Answer:

Depreciation to be recorded each year in income statement = $8,000

Accumulated depreciation at end of year 1 = $8,000

Accumulated depreciation at end of year 2 = $8,000 + $8,000 = $16,000

Explanation:

Provided information,

Taxi purchased for a value of $36,000

Expected salvage value = $4,000

Estimated life of asset = 4 years

Using straight line depreciation we have,

Depreciation each year = $\frac{36,000 - 4,000}{4} = 8,000$

Depreciation to be recorded each year in income statement = $8,000

Accumulated depreciation at end of year 1 = $8,000

Accumulated depreciation at end of year 2 = $8,000 + $8,000 = $16,000