Question

Lena Horn bought a Toyota Tundra on January 1 for $23,400 with an estimated life of 5 years. The residual value of the truck is $3,900. Assume a straight-line method of depreciation. What is the annual depreciation expense?

a) $4,700
b) $4,500
c) $3,900
d) $3,300

Answer 1

The annual depreciation expense for Lena Horn's Toyota Tundra is $4,500.

Step-by-step explanation:

To calculate the annual depreciation expense of Lena Horn's Toyota Tundra, we need to find the difference between the initial cost and the residual value of the truck. In this case, the initial cost is $23,400 and the residual value is $3,900.

The formula for straight-line depreciation is:

Annual Depreciation Expense = (Initial cost - Residual value) / Estimated life

Plugging in the values, we get:

Annual Depreciation Expense = ($23,400 - $3,900) / 5 = $4,500

Therefore, the correct answer is (b) $4,500.