Gulfcoast, Inc. purchased a van on January 1, 2019, for $930,000. Estimated life of the van was five years, and its estimated residual value was $93,000. Gulfcoast uses the straight-line method of depreciation. Calculate the book value of the van at the end of 2019.

Question

Quizplus · Accepted Answer

To calculate the annual depreciation, we need to subtract the residual value from the cost and divide it by the estimated life.

Annual depreciation = ($930,000 - $93,000) / 5 years = $167,400

To find the book value at the end of 2019, we need to subtract the depreciation expense for the year from the original cost.

Depreciation expense for 2019 = $167,400 * (1/5) = $33,480

Book value at the end of 2019 = $930,000 - $33,480 = $896,520

Therefore, the best choice is D) $762,600 because it is the only option that represents the book value at the end of 2019.