Question

Zinger Inc. has a delivery truck which originally cost $23,000. It has a residual value of $5,000. The truck has a total life of 9 years, and was purchased 3 years ago. This year, the truck was used from January 1 until March 31. On April 1, the truck was sold. If Zinger uses the straight-line method, what is the depreciation expense on the truck for this year (the year of sale)?

A) $500

B) $666

C) $1,500

D) $2,000

Answer 1

Correct answer-------------(A) $500

Working

Straight line Method
A	Cost	$ 23,000
B	Residual Value	$ 5,000
C=A - B	Depreciable base	$ 18,000
D	Life [in years left ]	9
E=C/D	Annual SLM depreciation	$ 2,000

Depreciation for the year is $2000 but only 3 month's depreciation will be calculated in current year.

Depreciation for 3 months = 2000/12 x 3=$500

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$          23,000.00	$ 2,000.00	$ 2,000.00	$ 21,000.00
2	$ 21,000.00	$ 2,000.00	$ 4,000.00	$ 19,000.00
3	$ 19,000.00	$ 2,000.00	$ 6,000.00	$ 17,000.00
4	$ 17,000.00	$ 500.00	$ 6,500.00	$ 16,500.00