Brazil Group purchases a vehicle at a cost of $50,000 on January 2, 2012. Individual components of the vehicle and useful lives are as follows.
|
Cost |
Useful Lives |
|
|
Tires |
$ 6,000 |
2 years |
|
Transmission |
10,000 |
5 years |
|
Trucks |
34,000 |
10 years |
Instructions
(a) Compute depreciation expense for 2012, assuming Brazil depreciates the vehicle as a single unit.
(b) Compute depreciation expense for 2012, assuming Brazil uses component depreciation.
(c) Why might a company want to use component depreciation to depreciate its assets?