On January 1, 2014, 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, 2015, assuming Wasson uses the straight-line depreciation method?

Question

Quizplus · Accepted Answer

Straight-line depreciation method depreciates the asset at the same amount each year over its useful life. The annual depreciation is calculated as:

($40,000 - $4,000) / 6 years = $6,000 per year

So, the vehicle's book value as of December 31, 2015 (after 2 years of depreciation) would be:

$40,000 - ($6,000 x 2 years) = $28,000

Hence, the correct choice is D) $28,000.

On January 1, 2014, Wasson Company Purchased a Delivery Vehicle