Business > QUESTIONS & ANSWERS > Depreciation and Depletion - In Class Example: | Download for quality grades| (All)
A heavy duty pickup truck is purchased for $45,000. The truck has an estimated useful life of 7 years, with an estimated "trade-in" or "salvage" value of $10,000 at the end of 7 years.1.) Calculate ... depreciation expense for the 7 years using the straight-line method: This means the exact same amount will be charged every year over the life of the truck. Amount per year is as follows: Cost: 45000 Estimated trade-in/salvage value 10000 Amount to depreciate: 35000 Number of years: 7 Depreciation charge per year: 5000 (divide) Year Starting book value Depreciation Charge Ending Book Value 1 $ 45,000 $ (5,000) $ 40,000 2 $ 40,000 $ (5,000) $ 35,000 3 $ 35,000 $ (5,000) $ 30,000 4 $ 30,000 $ (5,000) $ 25,000 5 $ 25,000 $ (5,000) $ 20,000 6 $ 20,000 $ (5,000) $ 15,000 7 $ 15,000 $ (5,000) $ 10,000 2.) Find the depreciation expense each year under the service hours method if the truck is expected to operate as follows: (Total service hours are expected to be 4,200 hours over 7 years). [Show More]
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