On December 31, year 0, your company bought a delivery truck for$45,000. The expected useful life is 4 years, with an expectedsalvage value of $15,000. On January 1, year 3, your company soldthe asset. Provide the financial statement effects of the saleunder the different sale prices below.
Sale price | PP&E, Gross | Accumulated Depreciation | NI (pretax) | CFO (ignore taxes) | CFI |
$29,850 | | | | | |
$30,000 | | | | | |
$30,670 | | | | | |
- True or false: If the salvage value is revised upwards, firmsmust restate prior periods’ financial statements to update bookvalues and depreciation amounts
- True or false: If a firm, by assumption, changes the usefullife of an asset, depreciation in the future will be different fromwhat it would have been absent the change in assumption.
