Question

on january 1, 2022, frame industries purchased a delivery vehicle costing $35,000. the vehicle has an estimated 8-year life and a $3,000 residual value. what is the vehicle's book value as of december 31, 2023, assuming frame uses the straight-line depreciation method?

Answer 1

The book value of Frame Industries' delivery vehicle as of December 31, 2023, is calculated using the straight-line depreciation method and is found to be $27,000 after considering a $35,000 original cost, a $3,000 residual value, and an 8-year useful life.

Step-by-step explanation:

The book value of Frame Industries' delivery vehicle as of December 31, 2023, using the straight-line depreciation method, is calculated as follows:

1. Calculate annual depreciation:
   Original cost – Residual value = Depreciable Amount.
   
   $35,000 – $3,000 = $32,000.
2. Divide the depreciable amount by the useful life of the asset:
   
   $32,000 / 8 years = $4,000 per year.
3. Multiply the annual depreciation by the number of years the asset has been in use:
   
   $4,000 per year * 2 years = $8,000.
4. Subtract the accumulated depreciation from the original cost to obtain the book value:
   
   $35,000 – $8,000 = $27,000.

Therefore, the book value of the delivery vehicle as of December 31, 2023, is $27,000.