Asked by Isabella Pucci on Jun 23, 2024
Verified
On January 1,2019,Wasson Company purchased a delivery vehicle costing $40,000.The vehicle has an estimated 6-year life and a $4,000 residual value. What is the vehicle's book value as of December 31,2020,assuming Wasson uses the straight-line depreciation method?
A) $12,000.
B) $24,000.
C) $30,000.
D) $28,000.
Straight-Line Depreciation
A method of allocating the cost of a tangible asset over its useful life in an equal and consistent manner.
Book Value
The net value of a company's assets found on the balance sheet, calculated as total assets minus intangible assets (patents, copyrights) and liabilities.
Residual Value
The estimated amount that an asset is worth at the end of its useful life.
- Familiarize oneself with the basics and calculation techniques pertaining to the straight-line depreciation method.
- Achieve proficiency in understanding the notion of book value, residual value, and the methods for computing annual depreciation expense.
Verified Answer
JE
Joycelyn EduseiJun 30, 2024
Final Answer :
D
Explanation :
Straight-line depreciation method calculates the same amount of depreciation expense each year. Therefore, the annual depreciation amount would be:
($40,000 - $4,000) / 6 years = $6,000
Depreciation expense for 2020 (2 years) would be:
$6,000 x 2 = $12,000
The book value of the vehicle as of December 31, 2020 would be:
$40,000 - $12,000 = $28,000
Therefore, the correct answer is D.
($40,000 - $4,000) / 6 years = $6,000
Depreciation expense for 2020 (2 years) would be:
$6,000 x 2 = $12,000
The book value of the vehicle as of December 31, 2020 would be:
$40,000 - $12,000 = $28,000
Therefore, the correct answer is D.
Learning Objectives
- Familiarize oneself with the basics and calculation techniques pertaining to the straight-line depreciation method.
- Achieve proficiency in understanding the notion of book value, residual value, and the methods for computing annual depreciation expense.