Question

A small delivery truck was purchased on January 1 at a cost of $25,000. It has an estimated useful life of four years and an estimated salvage value of $5,000.

Requird:
Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the straight-line method.

Answer 1

depreciation expense accumulated deprecation book value

$5,000 $5,000 $20,000

$5,000 $10,000 $15,000

$5,000 $15,000 $10,000

$5,000 $20,000 $ 5000

Step-by-step explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

($25,000 - $5000) / 4 = $5,000

Book value in year in subsequent years = previous book value - that year's depreciation expense

Year 1's book value = $25,000 - $5000 = $20,000

Year 2's book value = $20,000 - $5000 = $15,000

Year 1's book value = $15,000 - $5000 = 10,000

Year 1's book value = $10,000 - $5,000 = $5,000

Accumulated depreciation is sum of depreciation expense

Year 1 = 5,000

year 2 = 5000 x 2 = 10,000

year 3 = 5000 x 3 = 15,000

year 4 = 5000 x 4 = 20,000