A company purchased a delivery truck on January 1, 2021, for $65,000. The truck has an estimated life of 10 years and an estimated residual value of $5,000. If the company uses straight-line depreciation, what would be the book value after four years?

Answer :

Answer:

$41,000

Explanation:

The computation of the book value after four years is shown below:

= (Purchase value of delivery truck  - estimated residual value) ÷ (estimated useful life)  

= ($65,000 - $5,000) ÷ (10 years)  

= ($60,000) ÷ (10 years)  

= $6,000  

For four years, the depreciation would be

= $6,000 × 4 years

= $24,000

In this method, the depreciation is same for all the remaining useful life

Now the book value would be

= Acquired value of a delivery truck - accumulated depreciation  

= $65,000 - $24,000

= $41,000

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