A forklift had a purchase price of $10,000, delivery costs of $2,000, a physical life of 6 years and a useful life of 4 years. Estimated residual value is zero. The annual depreciation charge using the straight-line method is:
A) $2,000
B) $3,000
C) $2,500
D) $1,667

Question

Quizplus · Accepted Answer

The annual depreciation charge using the straight-line method is calculated by subtracting the residual value from the cost and then dividing by the useful life. The cost includes the purchase price plus delivery costs, so $10,000 + $2,000 = $12,000. With a useful life of 4 years and a residual value of $0, the annual depreciation is $12,000 / 4 = $3,000.

A Forklift Had a Purchase Price of $10,000, Delivery Costs