Tyrus bought a trailer two years ago in which to transport his bronco horses to
ID: 369903 • Letter: T
Question
Tyrus bought a trailer two years ago in which to transport his bronco horses to rodeos and other events. The trailer, which had no salvage value, cost him $20,000 and was depreciated by the straight-line method over ten years ($2,000 per year). If he would retire and needed to sell the trailer, Tyrus figures a rancher would pay him about $10,000, but it would cost Tyrus about $100 to place the ad and drive the trailer to whoever bought it. On the other hand, two year-old trailers like the one he owns are selling at used trailer lots for about $15,000. Recently, though, rodeo memorabilia was gaining in popularity and any number of speculators had offered to buy the trailer that had hauled so many famous horses for $12,500. Tyrus always considered himself a cowboy first and a businessman second and is having trouble deciding exactly what his trailer is worth. Can you help him?
Explanation / Answer
Cost of the trailer= $20,000
Less- Depreciation for 2years=$2000*2=$4000
Value of the trailer= $16000
The value of trailer to Tyrus at present is $16,000 so he should sale it for atleast $15,000 to minimize the loss.
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