Question

A truck costs $8,000 with a residual value of $1,000. It has an estimated useful life of 7 years. If the truck was bought on July 9 what would be the book value at the end of year 1?

Answer 1

$7520.55

Explanation:

Cost of truck = $8000

Residual value = $1000

Estimated useful life = 7 years

Depreciation = (cost of asset - salvage value) / useful life

Depreciation = (8000 - 1000) / 7

Depreciation = 7000 / 7

Depreciation = $1000

Truck was purchased on July 9, Therefore, Depreciation by the end of year one will be;

Number of days between July 9 and year end = 175 days

Daily Depreciation = $1000 / 365 = $2.739

Total Depreciation by year end = (daily Depreciation * 175 days) = $479.45.

Book value at the end of year 1 = (8000 - 479.45)

= $7520.55

Answer 2

The answer is "$7,500".

Explanation:

Formula:

In the month of July-December the depreciation:

`\frac{\text{Cost-Residual}}{\text{Useful life}}* (6)/(12) \\`

Cost-Residual= costs -residual value

Given:

Cost-Residual = $8, 000 - $ 1,00

= $7,000

Useful life= 7 years

Put the value in the above-given formula:

`=(7 000)/(7)* (6)/(12)\\\\= 1 000* (1)/(2)\\\\= 5 00\\`

Therefore, the book value on point at the end of one year is:

= $8,000 -$ 500

= $7,500