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The Vermont Construction Company purchased a truck on January 1, 2009 at a cost of $35000....

The Vermont Construction Company purchased a truck on January 1, 2009 at a cost of $35000. The truck has a useful life of eight years with an estimated salvage value of $6000. The straight-line method is used for book purposes, for tax purposes the track would be depreciated with the MACRS method over its five-year useful life. Determine the depreciation amount to be taken over the useful life of the having truck for both and tax purposes.

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Answer #1
BOOK PURPOSE DEPRECIATION
Cost of truck $35,000
Useful life in years 8
Estimated salvage Value $6,000
Annual Depreciation $3,625 (35000-6000)/8
TAX PURPOSE DEPRECIATION:
Cost of asset $35,000
A B=A*35000
MACRS -5 year MACRS Depreciation Book Purpose
Year Depreciation rate Amount(tax purpose) Depreciation
1 20% $7,000 $3,625
2 32% $11,200 $3,625
3 19.20% $6,720 $3,625
4 11.52% $4,032 $3,625
5 11.52% $4,032 $3,625
6 5.76% $2,016 $3,625
7 0% $0 $3,625
8 0% $0 $3,625
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