6) New York Limousine Service owns 10 limos and uses the units of production method in computing depreciations on its limos. Each limo costing $38,000 is expected to be driven 150,000 miles and is expected to have a salvage value of $4,500. Limo # 1 was driven 38,000 miles in year 1 and 36,000 miles in year 2. Determine the depreciation for each year and the book value at the end of year 2.

Use this information to answer questions 7 and 9

Consider a seven year MACRS asset that was purchased for $55,000. If the asset were disposed of in year 8 with salvage value of $3,500, compute:

7) The allowed depreciation:

8) The book value is:

9) Taxable gain is: