Question

A truck cost $21,000.00 with an estimated salvage value of $1,000.00. It has an estimated useful life of 5 years. If the truck was purchased on January 5, what would be the book value of the truck at the end of year 1, using the straight-line method?

$17,000.00
$16,000.00
$20,000.00
$4,000.00

Answer 1

$17,000

Explanation:

Accumulated depreciation is the year's depreciation plus the sum of all previous years' depreciation. The first year's end-of-year book value is the total cost minus the year's depreciation. For all other years, the year's end-of-year book value is the previous end-of-year book value minus the year's depreciation

Answer 2

Straight line depreciation applies the same amount of depreciation in each year.
Our Depreciation Base is 21,000 - 1,000 = 20,000
The useful life is 5 years, so each year we depreciate 20,000 ÷ 5 = 4,000

Book Value is Cost - Accumulated Depreciation
After Year 1:
Book Value = 21,000 - 4,000 = 17,000

Answer is A) 17,000