On January 12, 20X1, Zolle Company purchased a computer (cost, $7,500; expected life, five years; estimated salvage
Question:
On January 12, 20X1, Zolle Company purchased a computer (cost, $7,500; expected life, five years; estimated salvage value, $1,500) and a lightweight van for delivery purposes (cost, $36,000; estimated life, seven years; estimated salvage value, $8,000). 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 20X1 and 20X2.
2. Compute cost recovery of the computer cost for income tax purposes for 20X1 and 20X2.
3. Compute depreciation of the van cost for financial accounting purposes for 20X1 and 20X2.
4. Compute cost recovery of the van cost for income tax purposes for 20X1 and 20X2.
Analyze: What objectives or principles account for the differences between the financial accounting depreciation rules and the income tax cost recovery rules?
Step by Step Answer:
College Accounting Chapters 1-30
ISBN: 9781260247909
16th Edition
Authors: David Haddock, John Price, Michael Farina