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10 May, 16:02

On January 1, 2016, Wasson Company purchased a delivery vehicle costing $58,300. The vehicle has an estimated 8-year life and a $4,700 residual value. What is the vehicle's book value as of December 31, 2017, assuming Wasson uses the straight-line depreciation method

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  1. 10 May, 18:01
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    Book value on 31 december 2017 = $44900

    Explanation:

    The staright line depreciation calculates depreciation charge as a constant charge throughout the useful life of the asset.

    The formula for staright line depreciation expense is,

    Depreciation expense per year = (Cost - Residual value) / estimated useful life

    Thus, the depreciation expense per year on delivery vehicle will be,

    Depreciation expense = (58300 - 4700) / 8 = > $6700 per year

    The book value of vehicle on 31 december 2017 will be,

    Book value = Cost - Accumulated depreciation

    Book value = 58300 - (6700*2) = > $44900
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