Question

Elmer purchased a used vehicle that depreciates under a straight line method. The initial value of the car is $9600 and the salvage value is $600. If the car is expected to have a useful life of another 6 years, how much will it depreciate each year?

A. $100.00


B. $1500.00


C. $3600.00


D. $600.00

Answer 1

The depreciation each year is option B. $1500.00

Explanation:

Initial value of car = $9600

Salvage value = $600

Salvage value is the final value of product after all the depreciation have been applied on the product.

So, total depreciation on the car =
`\$9600 - \$600 \Rightarrow \$9000`

Also, it is given that the depreciation occurs at a straight line method i.e. same depreciation occurs every year.

Depreciation in 6 years = $9000

Depreciation in 1 year =

`(\$9000)/(6) \Rightarrow \$1500`

Hence, option B. $1500 is the correct answer for the depreciation every year.