Question

John Morse Corporation buys a van for $16,000. The estimated life of the van is four years. The residual value of the van is $4,000. After two years, the van is sold for $8,000. What was the difference between the book value and the amount received from selling the van if John used the straight-line method of depreciation?

Answer 1

$2000

Explanation:

van cost = $16000

Estimated life= 4 years

Residual value= $4000

using straight line method of depreciation

Depreciation per year=
`(16000-4000)/(4)`= 3000

Therefore book value ater two years = $16000- 2*3000= $10000

Selling price of book after 2 years= $8000

hence the difference between book value and the amount received

10000-8000= $2000