What amount of depreciation will you claim for each calender

Reference no: EM13529991

You have just bought a used track-typetractor to add to your production fleet. The initialcapitalized value of the tractor is $80,000. Theestimated service life remaining on the tractor is 9000 hours, andthe anticipated operating conditions across the remainder of itslife are normal. The salvage value of the tractor is$8,000.00.

You have decided to use a composite methodof depreciation. During the first two years, you use thedeclining balance method of depreciation. Since the tractoris used, the maximum rate of depreciation that can be used is 1/2times the straight-line rate. After first three years ofdepreciation , the straight line method will be used. Thetractor was purchased on 1 July 1972.

a)What amount of depreciation will you claim for each calenderyear during the period 1972-1975?

b)What percent of the total depreciable amount is taken in thefirst year?

c)The tax, interest, and insurance components of ownershipcost based on average annual value are:

Tax: 3%

Insurance: 2 %

Interest: 8%

Reference no: EM13529991

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