Trans-State Movers purchased a truck on January 1, 2016, for $51,375. At the time of purchase, the truck was estimated to have a useful life of 6 years and a residual value of $3,375. In 2017, Trans-State determined that the truck had a total useful life of 10 years and the residual value is unchanged. If Trans-State uses the straight-line method of depreciation, what will be the 2017 depreciation expense for the truck? a.$8,000 b.$4,732 c.$6,625
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Trans-State Movers purchased a truck on January 1, 2016, for $51,375. At the time of purchase, the truck was estimated to have a useful life of 6 years and a residual value of $3,375. In 2017, Trans-State determined that the truck had a total useful life of 10 years and the residual value is unchanged. If Trans-State uses the straight-line method of
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