Question
CarMax wishes to exchange a pre-fab building used in its operations. CarMax has received three offers from other companies in the industry, each of which
CarMax wishes to exchange a pre-fab building used in its operations. CarMax has received three offers from other companies in the industry, each of which lacks commercial substance: MCI WorldCom offered to exchange a Gulfstream G-450 jet, and pay $46,100. US Pharmaceutical offered to exchange a Black & Veatch knuckleboom loader, and pay $68,600. Dyna-Flex offered to exchange a Komatsu 120-ton truck, and pay $43,800. Information concerning each of the assets to be exchanged is noted below:
Cost | Accum Depn | Fair Value | |
CarMax--pre-fab building | 315,000 | 240,000 | 187,800 |
MCI WorldCom--Gulfstream G-450 jet | 240,000 | 190,100 | 141,700 |
US Pharmaceutical--Black & Veatch knuckleboom loader | 315,000 | 240,000 | 119,200 |
Dyna-Flex--Komatsu 120-ton truck | 150,000 | 65,000 | 144,000 |
Based on the three offers above and assuming CarMax uses the straight-line method of depreciation with a salvage value of $2,300 an estimated useful life of 4 years, what is the annual depreciation expense of the exchanged asset that produces the least amount of depreciation expense for CarMax in future years?
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