A truck with a cost of $82,000 has an estimated residual value of $16,000, has an estimated useful life of 12 years

A truck with a cost of $82,000 has an estimated residual value of $16,000, has an estimated useful life of 12 years, and is depreciated by the straight-line method. (a) Determine the amount of the annual depreciation. (b) Determine the book value at the end of the seventh year of use. (c) Assuming that at the start of the eighth year the remaining life is estimated to be six years and the residual value is estimated to be $12,000, determine the depreciation expense for each of the remaining six years.


Answer:
a. $5,500 [($82,000 – $16,000) ÷ 12]
b. $43,500 [$82,000 – ($5,500 × 7)]
c. $5,250 [($43,500 – $12,000) ÷ 6]



A building acquired at the beginning of the year at a cost of $1,450,000 has an estimated residual value of $300,000 and an estimated useful life of 10 years. Determine (a) the depreciable cost, (b) the straight-line rate, and (c) the annual straight-line depreciation.


Answer:
a. $1,150,000 ($1,450,000 – $300,000)
b. 10% = (1/10)
c. $115,000 ($1,150,000 × 10%), or ($1,150,000 ÷ 10 years)




A tractor acquired at a cost of $275,000 has an estimated residual value of $39,000, has an estimated useful life of 40,000 hours, and was operated 2,660 hours during the year. Determine (a) the depreciable cost, (b) the depreciation rate, and (c) the units-of-output depreciation for the year.


Answer:
a. $236,000 ($275,000 – $39,000)
b. $5.90 per hour ($236,000 ÷ 40,000 hours)
c. $15,694 (2,660 hours × $5.90)