Question

On January 1, Year 1, both Alpha Company and Beta Company purchased a truck that cost 34,000. Both trucks had a five year useful life and a 4,000 salvage value. Alpha Company decided to use straight-line depreciation while Beta used the double declining balance method. All other things being equal, what is the depreciation expense for Alpha Company in Year 1?

1) 6,000
2) 5,000
3) 4,000
4) 3,000

Answer 1

The straight-line depreciation expense for Alpha Company in Year 1 is calculated by subtracting the salvage value from the cost, then dividing by the useful life, resulting in a $6,000 expense.

Step-by-step explanation:

To calculate the depreciation expense for Alpha Company in Year 1 using the straight-line depreciation method, you would subtract the salvage value from the cost of the truck and then divide by the useful life of the truck. The calculation would be as follows:

Cost of truck - Salvage value = Depreciable amount
$34,000 - $4,000 = $30,000

Depreciable amount / Useful life = Yearly depreciation expense
$30,000 / 5 years = $6,000 per year

Therefore, the depreciation expense for Alpha Company in Year 1 is $6,000.