Asked by Jennifer Guillen on Jun 13, 2024
Verified
The Oberon Company purchased a delivery truck for $95,000 on January 2.The truck was estimated to have a $3,000 salvage value and a 4 year life.The truck was depreciated using the straight-line method.At the beginning of the third year,it was determined the truck's total useful life would be 6 years rather than 4,and the salvage at the end of the 6th year would be $1,500.Determine the depreciation expense for the truck for the 6 years of its life.
Straight-Line Method
The straight-line method is a technique of allocating an asset's cost evenly throughout its useful life, commonly used for depreciation and amortization calculations.
Salvage Value
The approximated market price of an asset upon completing its useful life.
Depreciation Expense
The allocated portion of the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.
- Comprehend and compute the depreciation expense employing various methodologies including straight-line, double-declining balance, and units-of-production.
- Comprehend the effects of alterations in depreciation estimates and the method for accounting for these changes.
Verified Answer
Year 1-Year 2 depreciation = ($95,000 - $3,000)/4 years = $23,000
Book value at 12/31/Year 2 = $95,000 - ($23,000 x 2)= $49,000
Year 3-Year 6 depreciation = ($49,000 - $1,500)/4 years = $11,875
Learning Objectives
- Comprehend and compute the depreciation expense employing various methodologies including straight-line, double-declining balance, and units-of-production.
- Comprehend the effects of alterations in depreciation estimates and the method for accounting for these changes.
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