Problem 5

Canes Restaurant purchased an oven and a delivery truck from a going out of business sale for a combined total of $32,000. An independent appraiser provides the following market values: oven - $15,000; delivery truck - $35,000.

1. How much of the purchase price should Canes allocate to each of the assets?

2. If the oven has a useful life of four years and an estimated salvage value of $1,600, how much depreciation expense should Canes record each year using the straight-line method?