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 book value shown on the Year 2 balance sheet is

A. $30,000

B. $38,000

C. $20,000

D. $28,000

Answer 1

The amount of book value shown on the Year 2 balance sheet is $38,000.

Step-by-step explanation:

The amount of book value shown on the Year 2 balance sheet can be calculated using the straight-line depreciation method. This method calculates depreciation expense by subtracting the salvage value from the initial cost and then dividing it by the useful life of the asset. In this case, the initial cost of the truck was $48,000, the salvage value is $8,000, and the useful life is four years. Therefore, the annual depreciation expense is ($48,000 - $8,000) / 4 = $10,000. To calculate the book value on the Year 2 balance sheet, we subtract the accumulated depreciation from the initial cost. In Year 1, the depreciation expense is $10,000, so the accumulated depreciation is $10,000. Therefore, the book value on the Year 2 balance sheet is $48,000 - $10,000 = $38,000.