Thank you for visiting Bill s Wrecker Service has completed a minor repair on a tow truck The repair cost was 1 080 and the book value prior to. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
The new book value for the tow truck after a minor repair costing $1,080 is $4,320. The building's new book value, after spending $7,500 on a roof replacement that extended its life by five years, is $85,800.
To calculate the new book value for the tow truck, we need to subtract the repair cost from the previous book value:
New Book Value of Tow Truck = Book Value prior to repair - Repair Cost
New Book Value of Tow Truck = $5,400 - $1,080
New Book Value of Tow Truck = $4,320
Therefore, the new book value for the tow truck should be $4,320.
For the building, we need to consider the effect of the roof replacement on the accumulated depreciation and adjust the book value accordingly.
The accumulated depreciation before the roof replacement was $43,600. Since the new roof extended the building's life by five years, we need to calculate the annual depreciation expense and subtract it from the accumulated depreciation.
Annual Depreciation Expense = Accumulated Depreciation / Useful Life
Annual Depreciation Expense = $43,600 / 5 years
Annual Depreciation Expense = $8,720 per year
Now, we can calculate the new accumulated depreciation after the roof replacement:
New Accumulated Depreciation = Accumulated Depreciation - (Annual Depreciation Expense * Number of Additional Years)
New Accumulated Depreciation = $43,600 - ($8,720 * 5)
New Accumulated Depreciation = $43,600 - $43,600
New Accumulated Depreciation = $0
Finally, we can calculate the new book value for the building by subtracting the new accumulated depreciation from the previous book value:
New Book Value of Building = Book Value prior to roof replacement - New Accumulated Depreciation
New Book Value of Building = $85,800 - $0
New Book Value of Building = $85,800
Therefore, the new book value for the building should be $85,800.
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