On January 12, 2016, Washington Company purchased a computer (cost, $13,000 expected life five years estimated salvage value , $1,500) and a lightweight van for delivery purposes (cost, $65,500 estimated life, seven years estimated salvage value , $6,000) For financial accounting purposes , the com...

1 Depreciation of computer 201613000 1500 5 Years 2300 2017 ...

On January 12, 2016, Washington Company purchased a computer (cost, $13,000; expected life five years; estimated salvage

Question:

On January 12, 2016, Washington Company purchased a computer (cost, $13,000; expected life five years; estimated , $1,500) and a lightweight van for delivery purposes (cost, $65,500; estimated life, seven years; estimated , $6,000). For financial accounting purposes , the company uses straight-line depreciation on all assets.
INSTRUCTIONS
1. Compute depreciation of the computer cost for financial accounting purposes for 2016 and
2017.
2. Compute cost recovery of the computer cost for income tax purposes for 2016 and 2017.
3. Compute depreciation of the van cost for financial accounting purposes for 2016 and 2017.
4. Compute cost recovery of the van cost for income tax purposes for 2016 and 2017.
Analyze: What objectives or principles account for the differences between the financial accounting depreciation rules and the income tax cost recovery rules?
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...