Question

A truck with a cost of $82,000 has an estimated residual value of $16,000, has an estimated useful life of 12 years, and is depreciated by the straight-line method.

a. determine the amount of the annual depreciation. $

b. determine the book value at the end of the seventh year of use. $

c. assuming that at the start of the eighth year the remaining life is estimated to be six years and the residual value is estimated to be $12,000, determine the depreciation expense for each of the remaining six years. $

Answer 1

1. Depreciation = (cost of asset - salvage value) / life of asset Depreciation = (82,000 - 16,000) / 12 = $5,500 per year

2. The book value at the end of the seventh year of use is
82,000−5,500×7years=43,500

3. Depreciation = (cost of asset - salvage value) / life of asset
Depreciation=(43,500−12,000)÷6
=5,250 per year