A delivery truck was purchased for $32,000 two years ago.It has a carrying value of $24,000 and an estimated residual value of $4,000.Assuming the use of straight-line depreciation,the truck's estimated useful life must have been

Question

Quizplus · Accepted Answer

The carrying value of the truck after two years is $24,000, which means that $8,000 in depreciation expense has been taken over two years ($32,000 - $24,000 = $8,000).

To determine the estimated useful life of the truck, we can use the formula:

(Cost - Residual Value) / Estimated Useful Life = Annual Depreciation Expense

Plugging in the numbers we have:

($32,000 - $4,000) / Estimated Useful Life = $8,000 / 2 years

Simplifying this equation gives:

Estimated Useful Life = ($28,000 / $8,000) * 2 years

Estimated Useful Life = 7 years

Therefore, the estimated useful life of the truck must have been seven years.

A Delivery Truck Was Purchased for $32,000 Two Years Ago