Joe Heffernan decided to starta snow removal business in his neighbourhood, which he called Sunland Care. He irvested his used truck into the business on Novernber 1.2023. Joe had purchased the truck on November 1.2020, for $15,100. He looked up the faif market value of his truck on a popular web site and arrived at a value for his truck of $8,500 as of November 1,2023. At that time, he used \$3,900 from his savings account to pay for the overhaul needed in order to prepare the truck for pushing a heavy plow. Then, after investing additional cash into the business, Sunland Care was able fo purchase, on November 5 , a brand new snow plow to be attached to the truck at a cost of $3,900. The apparatus to attach and operate the plow cost $2,100. In order to operate the truck on the streets, Joe was required to upgrade his driver's licence at a cost of $840 per year (\$70 per month/, add commercial use to his truck insurance at \$2,700 per month, and purchase a $1,060 business licence that was valid for one year: Based on its seasonal operations, loe determined that his business should depreciate the truck and plow us ing the units-of-production method. When making this decision, Joe also considered the estimatg of the residual values of these two assets. He believes that the truck will last another four years and be driven a total of 65,000 kiloritetres, at which time it could be sold for 5700 in the case of the plow, estimated units of production will also be 65,000 kilometres and the residual value is expected to be $2,100, after four year s of use. Sunland Care used the truck for 1,800 kilametres in the fiscal year ended December 31,2023 and 15,200 kilometres during the fscal year ended December 31.2024. Joe Heffernan decided to starta snow removal business in his neighbourhood, which he called Sunland Care. He irvested his used truck into the business on Novernber 1.2023. Joe had purchased the truck on November 1.2020, for $15,100. He looked up the faif market value of his truck on a popular web site and arrived at a value for his truck of $8,500 as of November 1,2023. At that time, he used \$3,900 from his savings account to pay for the overhaul needed in order to prepare the truck for pushing a heavy plow. Then, after investing additional cash into the business, Sunland Care was able fo purchase, on November 5 , a brand new snow plow to be attached to the truck at a cost of $3,900. The apparatus to attach and operate the plow cost $2,100. In order to operate the truck on the streets, Joe was required to upgrade his driver's licence at a cost of $840 per year (\$70 per month/, add commercial use to his truck insurance at \$2,700 per month, and purchase a $1,060 business licence that was valid for one year: Based on its seasonal operations, loe determined that his business should depreciate the truck and plow us ing the units-of-production method. When making this decision, Joe also considered the estimatg of the residual values of these two assets. He believes that the truck will last another four years and be driven a total of 65,000 kiloritetres, at which time it could be sold for 5700 in the case of the plow, estimated units of production will also be 65,000 kilometres and the residual value is expected to be $2,100, after four year s of use. Sunland Care used the truck for 1,800 kilametres in the fiscal year ended December 31,2023 and 15,200 kilometres during the fscal year ended December 31.2024
