Canyon Company has a used delivery truck that originally cost $24,500. Straight-line depreciation on the truck has been recorded for three years, with a $2,000 expected salvage value at the end of its estimated six-year useful life. The last depreciation entry was made at the end of the third year. Four months into the fourth year, Canyon disposes of the truck. Required

Answer: The disposal of the truck is$14,500

Explanation:

Cost - Salvage value / Useful life

Cost = $24,500

Salvage value = $ 2,000

Useful life = 6years

24,500 - 2,000/6

= 22,500 / 6

= 3,750

Yearly depreciation = $3,750

Provision for depreciation

Ist year cost - depreciation (24,500 - 3,750) = 20,750

2nd year cost - depreciation (20,750 - 3,750) = 17,000

3rd year cost = 17,000,

Net Book value for the 3rd year = $17,000

Accumulated depreciation = 3,750 + 3,750 = 7,500

Four months into the fourth year depreciation = 4/12*7,500

= 2,500

Total accumulated depreciation = 2,500 + 7,500

= 10,000

Original cost - Accumulated depreciation = disposal of the truck

24,500 - 10,000 = 14,500

Therefore the machine will be disposed for $14,500