A truck is purchased for $22,500 and has a resale value of $16,500 after a useful life of 5 years. Using a book value depreciation chart, calculate the number of years until the book value of the truck is $17,700. B. 2 years A. 1 year C. 3 years D. 4 years
A truck is purchased for $22,500 and has a resale value of $16,500 after a useful life of 5 years. Using a book value depreciation chart, calculate the number of years until the book value of the truck is $17,700. B. 2 years A. 1 year C. 3 years D. 4 years
Chapter1: Financial Statements And Business Decisions
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![**Depreciation Analysis of a Truck**
A truck is purchased for $22,500 and has a resale value of $16,500 after a useful life of 5 years. Using a book value depreciation chart, calculate the number of years until the book value of the truck is $17,700.
**Options:**
- A. 1 year
- B. 2 years
- C. 3 years
- D. 4 years
---
**Explanation:**
To solve this problem, you will need to understand the concept of depreciation and how to apply it to calculate the book value of an asset over time.
1. **Initial Purchase Price**: $22,500
2. **Resale Value after 5 Years**: $16,500
Depreciation is calculated using the following formula:
\[ \text{Depreciation per year} = \frac{\text{Initial Purchase Price} - \text{Resale Value after Useful Life}}{\text{Useful Life}} \]
Thus, the yearly depreciation amount can be calculated as:
\[ \text{Depreciation per year} = \frac{22,500 - 16,500}{5} = \frac{6,000}{5} = 1,200 \]
Using this information, we can determine the book value of the truck after each year.
- **After 1 Year**:
\[ \text{Book Value} = 22,500 - 1,200 = 21,300 \]
- **After 2 Years**:
\[ \text{Book Value} = 21,300 - 1,200 = 20,100 \]
- **After 3 Years**:
\[ \text{Book Value} = 20,100 - 1,200 = 18,900 \]
- **After 4 Years**:
\[ \text{Book Value} = 18,900 - 1,200 = 17,700 \]
From this calculation, you can see that the truck reaches a book value of $17,700 after 4 years.
**Answer:**
- D. 4 years
**Source:**
© 2022 International Academy of Science. All Rights Reserved.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0ca0459b-7c1d-4bc5-a010-9c0fc83c1378%2Fcb4a5e4c-60f5-4464-933b-281d3aa40af0%2F27qhfg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Depreciation Analysis of a Truck**
A truck is purchased for $22,500 and has a resale value of $16,500 after a useful life of 5 years. Using a book value depreciation chart, calculate the number of years until the book value of the truck is $17,700.
**Options:**
- A. 1 year
- B. 2 years
- C. 3 years
- D. 4 years
---
**Explanation:**
To solve this problem, you will need to understand the concept of depreciation and how to apply it to calculate the book value of an asset over time.
1. **Initial Purchase Price**: $22,500
2. **Resale Value after 5 Years**: $16,500
Depreciation is calculated using the following formula:
\[ \text{Depreciation per year} = \frac{\text{Initial Purchase Price} - \text{Resale Value after Useful Life}}{\text{Useful Life}} \]
Thus, the yearly depreciation amount can be calculated as:
\[ \text{Depreciation per year} = \frac{22,500 - 16,500}{5} = \frac{6,000}{5} = 1,200 \]
Using this information, we can determine the book value of the truck after each year.
- **After 1 Year**:
\[ \text{Book Value} = 22,500 - 1,200 = 21,300 \]
- **After 2 Years**:
\[ \text{Book Value} = 21,300 - 1,200 = 20,100 \]
- **After 3 Years**:
\[ \text{Book Value} = 20,100 - 1,200 = 18,900 \]
- **After 4 Years**:
\[ \text{Book Value} = 18,900 - 1,200 = 17,700 \]
From this calculation, you can see that the truck reaches a book value of $17,700 after 4 years.
**Answer:**
- D. 4 years
**Source:**
© 2022 International Academy of Science. All Rights Reserved.
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