On January 1, 2012, Lasche Auto Sales and Service purchased a vehicle for use in the business at a cost of $22,000.The vehicle has a 4-year useful life with an expected residual value of $2,000.The company has a December 31 year-end and uses straight-line depreciation for all capital assets.What are the balances in the capital asset and accumulated depreciation account (after adjusting entries) on December 31, 2014? $\begin{array}{lll}
&\text {Capital }&\text { Accumulated}\
&\text { Assets }&\text {Depreciation }\
\text { A) } & \$ 22,000 & \$ 15,000 \
\text { B) } & \$ 22,000 & \$ 16,500 \
\text { C) } &\$ 20,000 & \$ 15,000 \
\text { D) }& \$ 20,000 & \$ 16,500
\end{array}$

Question

On January 1, 2012, Lasche Auto Sales and Service purchased a vehicle for use in the business at a cost of $22,000.The vehicle has a 4-year useful life with an expected residual value of $2,000.The company has a December 31 year-end and uses straight-line depreciation for all capital assets.What are the balances in the capital asset and accumulated depreciation account (after adjusting entries) on December 31, 2014? $\begin{array}{lll}
&\text {Capital  }&\text { Accumulated}\
&\text { Assets }&\text {Depreciation }\
\text { A) } & \$ 22,000 & \$ 15,000 \
\text { B) } & \$ 22,000 & \$ 16,500 \
\text { C) } &\$ 20,000 & \$ 15,000 \
\text { D) }& \$ 20,000 & \$ 16,500
\end{array}$

Quizplus · Accepted Answer

The cost of the vehicle is $22,000, and it depreciates over 4 years to a residual value of $2,000. The annual depreciation is $(\$22,000 - \$2,000) / 4 = \$5,000$. After 3 years (by December 31, 2014), the accumulated depreciation is $3 \times \$5,000 = \$15,000$. The capital asset account remains at the purchase cost of $22,000.

On January 1, 2012, Lasche Auto Sales and Service Purchased