Fabian Woodworks

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.
-Refer to Fabian Woodworks. What amount will be reported as depreciation expense over the 5-year life of the equipment?
A)$12,000
B)$ 8,000
C)$10,000
D)$ 4,000

Question

Fabian Woodworks
​
This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.
-Refer to Fabian Woodworks. What amount will be reported as depreciation expense over the 5-year life of the equipment?
A)$12,000
B)$ 8,000
C)$10,000
D)$ 4,000

Quizplus · Accepted Answer

The annual depreciation expense can be calculated using the straight-line method: 
Depreciation expense per year = (Cost - Residual value) / Useful life
Depreciation expense per year = ($12,000 - $2,000) / 5 = $2,000

Therefore, the total depreciation expense over the 5-year life of the equipment would be $2,000 x 5 = $10,000.

Fabian Woodworks ​

Fabian Woodworks