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March 25, 2017

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I am trying to figure out if I am doing this accounting problem correctly?

Old van was purchased 5 years ago at 20,000. estimated life was 5years with salvage value of 5,000.

van has to have repairs enging and tranny for 4000 and will extend life of van by 5years. new tires and other repairs estimated at 1200.

a new van with trade-in value 6,000 on old van with purchase of new van costing 30,000. if new van is purchased and plan to depreciate it using units of production method. this units would be based on number of miles driven. the new van salvage value is 10,000 after its useful life of 100,000.

1. Depreciation expense for existing ban.
cost of van 20,000
less: salvage 5,000
Depreciatable cost: 15000

2. the repaired van (the deprication of existing van).
original cost 20,000
accumalated deprication (20,000-5,000)/5= 3000
time 5 years = 15000
new risual value= 20,000-15,000=5,000
cost of repairs 5200 with 5 year life.

this is as far as i have gotten I don't know what else to do? Or if this is even right. Please help me...

  • Accounting - ,

    you need a smaller useful life like 5 or 10 year then you take the salvage minus the cost of the van and then you divide that amount by the useful life. Here is an example $20,000.00- $5,000.00= $15,000.00/ 10years = $1,500.00 is the amount of depreciation. Hope this helps

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