Question

g 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'

Answer 1

The new bus is rolling stock asset

depreciation is $8,000

Step-by-step explanation:

Rolling stock asset in the U.S is a conveyance vehicle such a buses,vans ,locomotives,ferryboats and so on.

annual depreciation =(cost-salvage value)/useful life

cost of the new bus is $95,000

salvage value is $15,000

useful life is 10 years

yearly depreciation charge =($95,000-$15,000)/10 years

=$8,000

Note that the $10,000 trade-in value is relevant when computing the cash payable to the car dealer,it is not deducted here since it forms part of asset cost.