On January 1, 2016, Your Ride Inc. paid $36,000 cash to purchase a taxi cab. The taxi

Question:

On January 1, 2016, 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 2016 and 2017 income statements.

b. Determine the amount of accumulated depreciation that would appear on the 2016 and 2017 balance sheets.

c. Explain how the purchase of equipment would affect the 2016 and 2017 statements of cash flows.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...