Question

A truck costs $16,000 with a residual value of $1,000. It has an estimated useful

life of five years. If the truck was bought on July 3, what would be the book
value at the end of year 1 using straight-line rate?
A. $1,500
B. $16,000
C. $12,500
D. $14,500

Answer 1

Option D.

Explanation:

Cost of truck = $16000

Residual value after 5 years = $1000

Depreciated value of a truck in 5 year is

`Depreciation=16000-1000=15000`

In straight-line method, the value of a fixed asset depreciate by a constant rate.

Since depreciation of truck in 5 years is $15000, therefore, the depression of one year is

1 year Depreciation =
`(15000)/(5)=3000`

From July 3 to end of fist year = 1/2 year

1/2 year Depreciation =
`(3000)/(5)=1500`

So, the value at the end of year 1 using straight-line rate is

`Value=16000-1500=14,500`

Therefore, the correct option is D.