Subject: Financial Management (1,15)

Depreciation and Cost Recovery

Brock Florist Company bought a new delivery truck for $29,000. It is classified as a light-duty truck and can be depreciated either by straight line method or MACRS. http://www.milefoot.com/math/businessmath/topics/macrs.htm The company sold its delivery truck in problem after three years of service. The tax rate is 30%.

1. Based on MACRS. How many years is the asset is expected to be accounted for?

2. Depreciation expense in Year 1 is RM_______.

3. Accumulated depreciation in Year 3 is RM_______.

4. The net asset value in year 3 is RM__________.

5. The asset is sold in Year 3 for RM15,000, calculate the net gain/ loss on disposal.

6. Calculate the recognized cash flow from disposal of asset. RM___________.

7. The asset is sold in Year for RM5,000, calculate the net gain/ loss on disposal.

8. Calculate the recognized cash flow from disposal in Q17.

9. Based on SLM, the depreciation expenses for the truck year on year is RM________.

10. What is the net asset value in Year 3 using SLM? RM________.