Question:
On January 1, year 1, Marino moving company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. If Marino uses the straight-line method, the amount of book value shown on the year 2 balance sheet is
Answer:
Book value =Cost- Accumulated depreciation
Accumulated depreciation = Number of years * Depreciation per year
Depreciation per year (straight line method) = (Cost – Salvage value) / Number of useful years
= ($48,000 – $8000) / 4
Accumulated depreciation after year 2
= 2 * $10,000
= $20,000
Book value after year 2
= $48,000 – $20,000
= $28,000
The amount of book value shown on the year 2 balance sheet is $28,000