Demarco Phipps purchased a used tractor for $17,500. Before the tractor could be used, it required new tires, which cost $1,100, and an overhaul, which cost $1,400. Its first tank of fuel cost $75. The tractor is expected to last six years and have a residual value of $2,000. Determine the cost and depreciable cost of the tractor and calculate the first year’s depreciation under the straight-line method.

Depreciation Methods