Barefoot Industrial acquired a new delivery truck at the beginning of its current fiscal year. The truck
Question:
Barefoot Industrial acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $117,000 and has an estimated useful life of four years and an estimated salvage value of $18,000.
Required:
a. Calculate depreciation expense for each year of the truck’s life using:
1. Straight-line depreciation.
2. Double-declining-balance depreciation.
b. Calculate the truck’s net book value at the end of its third year of use under each depreciation method.
c. Assume that Barefoot Industrial had no more use for the truck after the end of the third year and that at the beginning of the fourth year it had an offer from a buyer who was willing to pay $27,900 for the truck. Should the depreciation method used by Barefoot Industrial affect the decision to sell the truck?
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
Accounting What the Numbers Mean
ISBN: 978-1260565492
12th edition
Authors: David Marshall, Wayne McManus, Daniel Viele