Connors Tasty Vegan Restaurant purchased an oven and a delivery vehicle from a going out of business

Question:

Connor’s Tasty Vegan Restaurant purchased an oven and a delivery vehicle from a “going out of business” sale for a combined total of $32,000. An independent appraiser provides the following market values: oven—$15,000; delivery vehicle—$35,000.

1. How much of the purchase price should Connor’s allocate to each of the assets?

2. If the oven has a useful life of four years and an estimated salvage value of $1,600, how much depreciation expense should Connor’s record each year using the straight-line method?

3. If the delivery vehicle has a useful life of eight years and an estimated salvage value of $2,000, what would the book value of the vehicle be at the end of three years using the double-declining balance method?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...