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?

Question

Quizplus · Accepted Answer

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.

On January 1,2019,Wasson Company Purchased a Delivery Vehicle Costing $40,000