Question

Your firm purchased a truck for $33,000 on June 30, 2021. It had a salvage value of $5,000 and an estimated useful life of 3 years. The year ends on 12/31/21. Assume straight-line depreciation is used. Six months depreciation expense for 2021 would be:

Group of answer choices

11,000

9,333

4,667

3,889

depreciation expense for 2022 would be:

9,333

3,889

4,583

11,000

if you sell the truck at 12/31/23 for $12,000 cash, you would have a (Don’t forget to include all depreciation recorded in 2021, 2022, and 2023 in calculating the book value!):

Group of answer choices

Loss of $7,778

Gain of $1,555

Gain of $2,333

Loss of $1,555

Answer 1

Depreciation under Straight line method
	depreciation = (Cost of the asset - Salvage Value)/ Useful life of asset
	= ($33000- $5000)/3
	=$28000/3
	=$9333 per year
Depreciation expense per year = $9333

A) Six Months Depreciation Expense for 2021 is

Depreciation Expense = $9333 *6/12 = $4667

B) Depreciatio Expense for 2022 is

Depreciation Expense = $9333

C) Gain or Loss on Sale of Truck

Book Value of truck = Cost - Accumulated Depreciation

= $33000 - $4667 - $9333 -$9333

=$9667

Sale Value of truck = $12000

Gain on SAle of Truck = SAle Price - Book Value

= $12000 - $9667

=$2333