A truck costs $16,000 with a residual value of $1,000. It has an estimated useful life of five years. If the truck was bought on July 3, what would be the book value at the end of year 1 using straight-line rate?

Question

Quizplus · Accepted Answer

Straight-line rate = (purchase price - residual value) / useful life
= ($16,000 - $1,000) / 5 years
= $3,000 depreciation per year
Book value at end of year 1 = $16,000 - ($3,000 x 1) = $13,000
Therefore, the correct answer is (C) $14,500.

A Truck Costs $16,000 with a Residual Value of $1,000