A truck cost $21,000.00 with an estimated salvage value of $1,000.00. It has an estimated useful life of 5 years. If the truck was purchased on January 5, what would be the book value of the truck at the end of year 1, using the straight-line method? $17,000.00 $16,000.00 $20,000.00 $4,000.00
Accepted Solution
A:
Straight line depreciation applies the same amount of depreciation in each year. Our Depreciation Base is 21,000 - 1,000 = 20,000 The useful life is 5 years, so each year we depreciate 20,000 ÷ 5 = 4,000
Book Value is Cost - Accumulated Depreciation After Year 1: Book Value = 21,000 - 4,000 = 17,000