BTL Company purchased a tractor at a cost of $60,000 on January 1, 2019. The tractor has an estimated salvage value of $10,000 and an estimated life of 8 years. If BTL uses the straight-line method, what is the book value at January 1, 2023?

Question

Quizplus · Accepted Answer

The book value of an asset is its cost minus the accumulated depreciation. The accumulated depreciation is calculated by multiplying the annual depreciation expense by the number of years the asset has been in use. In this case, the annual depreciation expense is ($60,000 - $10,000) / 8 = $6,250. The tractor has been in use for 4 years, so the accumulated depreciation is $6,250 * 4 = $25,000. The book value at January 1, 2023 is $60,000 - $25,000 = $35,000.

BTL Company Purchased a Tractor at a Cost of $60,000