Question

Heavy general purpose trucks are often used in pipeline operations. They are built to hold up when carrying or pulling substantial loads, and yet still be suitable for regular highway use. A new truck with appropriate options is purchased for $47,000. It is estimated to have a useful life of 5 years and a salvage value of $2,900 at that time.

Required:
Develop a table showing the depreciation.

Answer 1

Results are below.

Explanation:

Giving the following information:

Purchase price= $47,000

Salvage value= $2,900

Useful life= 5 years

To calculate the annual depreciation, we need to use the following formula:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (47,000 - 2,900) / 5= $8,820

The accumulated depreciation is calculated as follow:

Accumulated depreciation= years of depreciation*annual depreciation

For year 4:

Accumulated depreciation= 8,820*4= $35,280

Finally, the book value is:

Book value= purchase price - accumulated depreciation

Year Annual depreciation Accumulated depreciation Book value

1 8820 8820 38180

2 8820 17640 29360

3 8820 26460 20540

4 8820 35280 11720

5 8820 44100 2900