On January 1, Eagle Co. paid $65,000 for a new truck. It was estimated that the truck would be driven 300,000 miles during the next 5 years, at which time it would have a salvage value of $10,000. At the end of the first and second years, the odometer registered 55,000 and 115,000 miles, respectively. What is the book value of the truck using straight-line depreciation at the end of the second year?

Question

Quizplus · Accepted Answer

The depreciation expense per year is calculated as follows:
Depreciation = (Cost - Salvage value) / Useful life in miles
Depreciation = ($65,000 - $10,000) / 300,000 miles per year x 5 years = $11,000 per year
Therefore, the accumulated depreciation at the end of the second year is $22,000 ($11,000 x 2).
The book value of the truck at the end of the second year is:
Book value = Cost - Accumulated depreciation
Book value = $65,000 - $22,000 = $43,000