On January 1, Year 1, Melon Moving Company paid $60,000 to purchase a truck. The truck was expected to have a five-year useful life and a $5,000 salvage value. If Melon uses the straight-line method, the amount of book value shown on the Year 4 balance sheet is
A)$27,000
B)$16,000
C)$5,000
D)zero

Question

Quizplus · Accepted Answer

First, we need to determine the annual depreciation expense using the straight-line method:

Cost - Salvage value / Useful life = Annual depreciation expense

$60,000 - $5,000 / 5 years = $11,000

Therefore, the accumulated depreciation after 4 years is:

$11,000 x 4 = $44,000

The book value is calculated as:

Cost - Accumulated depreciation = Book value

$60,000 - $44,000 = $16,000

Therefore, the amount of book value shown on the Year 4 balance sheet is $16,000.

On January 1, Year 1, Melon Moving Company Paid $60,000