Question

Spitz Corporation acquired a truck on January 1, 2010. The total cost of the truck was $70,000. Spitz estimated that the truck would be used for 10 years before being sold for an estimated $7,000. Assuming the use of straight-line depreciation, the balance of accumulated depreciation on December 31, 2015 was:

Answer 1

$37,800

Step-by-step explanation:

The straight line depreciation formula is given as under:

Depreciation = (Cost - Scrap Value) / Useful life

Here:

Cost = $70,000

Scrap Value = $7,000

Useful Life = 10 years

By putting values, we have:

Depreciation = ($70,000 - $7000) / 10 Years = $6,300

Now

Accumulated Depreciation = Depreciation for year * Number of years of possession of Non current asset

The number of years the asset was used by the firm is 6 years (January 1, 2010 to December 31, 2015.

So by putting values:

Accumulated Depreciation = $6,300 * 6 years = $37,800