Assume you have just accepted a job that requires you to do a lot of driving. Because your current car is on its "last leg." you have decided to purchase an automobile. You estimate that you will drive 20,000 miles each year. Because you don't like to deal with major car repairs, you will trade in the car when it reaches 60,000 miles. 

You have found two cars that you are considering. One is a new car (A), and you can purchase it for $18,000. The other is a late-model used car (B). The used car has 20,000 miles on it, but it is in excellent condition. The price of this used car is $11,000. 

Using the criteria outlined, what would be your depreciation cost per year for each car using straight-line method? Show your calculation in your response. If you were trying to get the highest detection annually, which car would you choose A or B? 

Show the entry you would need to make annually for one of the cars.

Answer rating: 100% (QA)

Depreciation means diminution or fall in the financial value of fixed assets primarily owing to wear ... View the full answer