A company purchased a new truck at a cost of $42,000 on July 1. The truck is estimated to have a useful life of 6 years and a residual value of $3,000. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the truck during the first year ended December 31?

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as (Cost - Residual Value) / Useful Life. For this truck, it's ($42,000 - $3,000) / 6 = $6,500 per year. Since the truck was purchased on July 1, only 6 months of depreciation applies for the first year, so $6,500 / 2 = $3,250.

A Company Purchased a New Truck at a Cost of $42,000