Fabian Woodworks This company purchased a truck at a cost of $12,000.The truck has an estimated residual value of $2,000 and an estimated life of 5 years,or 100,000 hours of operation.The truck was purchased on January 1,2012,and was used 27,000 hours in 2012 and 26,000 hours in 2013.
-Refer to Fabian Woodworks.What amount will be reported as depreciation expense over the 5-year life of the equipment?

Question

Quizplus · Accepted Answer

To calculate depreciation expense, we need to first find the depreciable cost of the truck, which is the original cost minus the estimated residual value:

Depreciable cost = $12,000 - $2,000 = $10,000

Then, we can use the straight-line method to calculate annual depreciation:

Annual depreciation = Depreciable cost / Estimated life

Annual depreciation = $10,000 / 5 = $2,000

Finally, we can find the total depreciation expense over the 5-year life of the equipment by multiplying the annual depreciation by the number of years:

Total depreciation expense = Annual depreciation x Number of years

Total depreciation expense = $2,000 x 5 = $10,000

Therefore, the answer is C) $10,000.

Fabian Woodworks This Company Purchased a Truck at a Cost