Suppose a company purchases a van for £21,000 with the intention of using it for three years and selling it for £6,000 at the end of the three years.The company uses straight line depreciation.Which of the following statements is correct?
A) The annual depreciation charge is £7,000
B) The annual depreciation charge is £21,000
C) The annual depreciation charge is £5,000
D) The annual depreciation charge is £15,000

Question

Quizplus · Accepted Answer

Depreciation (simplified, straight line method) is the total cost of the asset over it's useful economic life, divided by the number of years of use. The van costs £21,000 but will be sold for £6,000 and therefore costs only £15,000 over the three years. £15,000 over three years is £5,000 per year.

Suppose a Company Purchases a Van for £21,000 with the Intention