Question

Monty Company acquires a delivery truck at a cost of $62,000. The truck is expected to have a salvage value of $12,000 at the end of its 4-year useful life. Compute annual depreciation expense for the first and second years using the straight-line method.

Answer 1

Answer:

The depreciation of the 1st year is $12500, while that of 2nd year is $25000.

Explanation:

As per the given data

Cost=$62000

Salvage Value=$12000

Useful Life=4 years

The depreciation for a year is given as

Depreciation for a year=(Cost-Salvage Value)/Useful Life

                                      =$62000-$12000/4

                                      =$50000/4=$12500

So the depreciation of 1st year is $12500

The depreciation of 2nd year is $12500x2=$25000