3.7 LO4 Following on from Exercise 3.4, Murph’s expanding his business and has just bought another truck.

Details of the purchase are:

Dealer charge $290,000 Installation of GPS, safety devices, etc $4,060 Delivery charges $2,900 Import taxes $5,800 Murph’s been talking to some of his trucking buddies and has been advised that he should be using

‘kilometres driven’ as the basis for determining his depreciation expense. Murph estimates that he’ll get 500,000 km from the truck, at which time he’ll be able to sell it for $10,000.

(a) Calculate the depreciation charge for 80,000 km of use in year 1.

(b) Calculate the depreciation charge for 100,000 km of use in year 2.

(c) Show how Murph’s truck will appear on the balance sheet at the end of year 2.