Question

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. If Marino uses the straight-line method, the amount of accumulated depreciation shown on the Year 2 balance sheet is

A. $10,000

B. $20,000

C. $12,000

D. $24,000

Answer 1

Using the straight-line depreciation method, Marino Moving Company would show $20,000 of accumulated depreciation on the Year 2 balance sheet for the truck.

Step-by-step explanation:

When Marino Moving Company purchased a truck for $48,000 with an expected four-year useful life and a $8,000 salvage value, the annual depreciation using the straight-line method can be calculated. First, we deduct the salvage value from the purchase price to find the depreciable amount: $48,000 - $8,000 = $40,000. Then we divide the depreciable amount by the useful life of the truck to find the annual depreciation: $40,000 ÷ 4 = $10,000 per year.

At the end of Year 1, the accumulated depreciation would be $10,000, and by the end of Year 2, it would simply double as there are no changes to the depreciation rate or method, resulting in $20,000 of accumulated depreciation to be shown on the Year 2 balance sheet. Therefore, the correct answer is B. $20,000.