Question

Sandhill Chemicals Company acquires a delivery truck at a cost of $30,800 on January 1, 2022. The truck is expected to have a salvage value of $3,700 at the end of its 4-year useful life. Compute annual depreciation for the first and second years using the straight-line method.

Answer 1

Using the straight-line method, the annual depreciation for the first and second years for Sandhill Chemicals Company's delivery truck, which costs $30,800 and has a salvage value of $3,700 after 4 years, is calculated to be $6,775 per year.

Step-by-step explanation:

The Sandhill Chemicals Company's delivery truck, which has a cost of $30,800 and a salvage value of $3,700 at the end of its 4-year useful life, requires an annual depreciation calculation using the straight-line method. To compute this, we first find the total depreciable amount by subtracting the salvage value from the cost of the truck:

• Total depreciable amount = Cost - Salvage Value
• Total depreciable amount = $30,800 - $3,700
• Total depreciable amount = $27,100

Then we divide this total depreciable amount by the useful life of the truck to find the annual depreciation:

• Annual Depreciation = Total depreciable amount / Useful Life
• Annual Depreciation = $27,100 / 4 years
• Annual Depreciation = $6,775

Therefore, the annual depreciation for the first and second years using the straight-line method is $6,775 per year.

Answer 2

$6,775

Step-by-step explanation:

The computation of the depreciation expense using the straight line method is shown below:

Straight-line method:

= (Original cost - residual value) ÷ (useful life)

= ($30,800 - $3,700) ÷ (4 years)

= ($27,100) ÷ (4 years)

= $6,775

In this method, the depreciation is same for all the remaining useful life

Therefore, in the first and second year the same depreciation expense is to be charged i.e $6,775