On January 1, Bisbee Co. paid $80,000 for a new truck. It was estimated that the...
On January 1, Bisbee Co. paid $80,000 for a new truck. It was estimated that the truck would be driven 400,000 miles during the next 8 years, at which time it would have a salvage value of $8,000. At the end of the first and second years, the odometer registered 45,000 and 97,000 miles, respectively. Calculate the book value of the truck using straight-line depreciation at the end of the second year.
Homework Answers
Computation the book value at the end of the second year is:
Book value at the end of the second year = Cost of truck - Accumulated depreciation of truck
= $80,000 - $18,000
= $62,000
Hence, the book value is $62,000.
Working note:
1.
Computation the depreciation of each year is:
Depreciation of each year = (Cost of truck - Salvage value) / Estimated useful life
= ($80,000 - $8,000) / 8
= $72,000 / 8
= $9,000
Hence, the depreciation of each year is $9,000.
2.
Computation the accumulated depreciation of truck is:
Accumulated depreciation of truck = Depreciation of each year * 2
= $9,000 * 2
= $18,000
Hence, the accumulated depreciation of truck is $18,000.
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