Rose Bush Nursery purchased a delivery truck for $40,000. The truck is expected to have a useful life of 5 years and a residual value of $2,800. The company uses the straight-line method of depreciation. If the truck was purchased on June 1, 2019, what is the amount of depreciation expense for the truck for the year ended December 31, 2019?

Question

Quizplus · Accepted Answer

First, we need to calculate the annual depreciation expense:
Annual Depreciation Expense = (Cost - Residual Value) / Useful Life
Annual Depreciation Expense = ($40,000 - $2,800) / 5 = $7,440
Since the truck was purchased on June 1, 2019, the company owned the truck for 214 days (from June 1 to December 31) during the year ended December 31, 2019. Therefore, the depreciation expense for the year ended December 31, 2019 is:
Depreciation Expense = (Annual Depreciation Expense / 365) x Days Owned
Depreciation Expense = ($7,440 / 365) x 214 = $4,340
Thus, the correct answer is B.

Rose Bush Nursery Purchased a Delivery Truck for $40,000