Question

Lena Horn bought a Toyota Tundra on January 1 for $29,000 with an estimated life of...

Lena Horn bought a Toyota Tundra on January 1 for $29,000 with an estimated life of 4 years. The residual value of the truck is $5,800. Assume a straight-line method of depreciation.

a. What will be the book value of the truck at the end of year 4? Book value $

b. If the Tundra was bought the first year on April 12, how much depreciation would be taken the first year?

Depreciation $

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Homework Answers

Answer #1

Answer to Part a.

Straight Line Depreciation per year = (Cost – Residual Value) / Useful Life
Straight Line Depreciation per year = ($29,000 - $5,800) / 4
Straight Line Depreciation per year = $5,800

Book Value at the end of Year 4 = Cost – Accumulated Depreciation
Accumulated Depreciation for 4 years = $5,800 * 4
Accumulated Depreciation for 4 years = $23,200

Book Value at the end of Year 4 = $29,000 - $23,200
Book Value at the end of Year 4 = $5,800

Answer to Part b.

Straight Line Depreciation per year = $5,800
No. Of days in First Year i.e. from April 12 to December 31= 263 days

Depreciation for First Year = $5,800 * 263 / 365
Depreciation for First Year = $4,179.18

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