ABC purchases a new delivery truck on January 1, 2022. The cost of the truck is $40,000. The truck is expected to last for five (5) years and at that time have a salvage (residual) value of $5,000. After two (2) years, ABC believes it will now have the delivery truck for a total of 8 years and after that time, the truck will have a $2,000 salvage (residual) value. After 6 years, ABC sells the truck for $6,000. For Questions, 1-9, assume that ABC uses the straight-line method of depreciation.

1.What is the Year 1 Depreciation Expense?

Enter all amounts as a positive number with no dollar signs or commas. For example, if the answer is $3,500, enter 3500.

2.

What is the impact on net income in Year 1 as a result of the events described?

If the amount is an increase to net income, enter a positive number. If the amount is a decrease to net income, enter a negative number. If there is no impact, enter 0 (zero). Do not enter any dollar signs or commas. Use the negative sign for any negatives numbers.

3.

What is the Year 2 depreciation expense?

Enter all amounts as a positive number with no dollar signs or commas. For example, if the answer is $3,500, enter 3500.

4.

What is the impact on cash flow in Year 2 as a result of the events described?

If the amount is an increase to net income, enter a positive number. If the amount is a decrease to net income, enter a negative number. If there is no impact, enter 0 (zero). Do not enter any dollar signs or commas. Use the negative sign for any negatives numbers.

5.

What is the Year 3 depreciation expense?

Enter all amounts as a positive number with no dollar signs or commas. For example, if the answer is $3,500, enter 3500.

6.

What is the Net Book Value of the Delivery Truck AFTER 3 Years?

Enter all amounts as a positive number with no dollar signs or commas. For example, if the answer is $3,500, enter 3500.

7.

What is the Net Book Value of the Delivery Truck AFTER 6 Years?

Enter all amounts as a positive number with no dollar signs or commas. For example, if the answer is $3,500, enter 3500.

8.

What is the balance in Accumulated Depreciation of the Delivery Truck AFTER 6 Years (immediately prior to the sale)?

Enter all amounts as a positive number with no dollar signs or commas. For example, if the answer is $3,500, enter 3500.

9.

What is the gain/(loss) on the sale of the Delivery Truck?

If the amount is an increase to net income, enter a positive number. If the amount is a decrease to net income, enter a negative number. If there is no impact, enter 0 (zero). Do not enter any dollar signs or commas. Use the negative sign for any negatives numbers.

10.

If ABC had use the double declining balance method of depreciation (the accelerated method), what would the depreciation expense be for Year 1?

Enter all amounts as a positive number with no dollar signs or commas. For example, if the answer is $3,500, enter 3500.