A truck is purchased for $35,000. It has a five-year life and a $5,000 residual value. Under the straight-line method, what is the asset's carrying value after three years?

Question

Quizplus · Accepted Answer

Straight-line depreciation formula is (purchased value - residual value) / useful life in years. 
So, annual depreciation = ($35,000 - $5,000) / 5 = $6,000. 
After three years, the accumulated depreciation is $6,000 x 3 = $18,000. 
Therefore, the carrying value of the truck after three years is $35,000 - $18,000 = $17,000. 
Hence, the best choice is B.

A Truck Is Purchased for $35,000