Business Math

Lena Horn bought a Toyota Tundra on January 1 for $30,000 with an estimated life of 5 years. The residual value of the truck is $5,000. Assume a straight-line method of depreciation.

a. What will be the book value of the truck at the end of year 4?
b. If the Tundra was bought the first year on April 12, how much depreciation would be taken the first year?

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  1. Ater 5 years it is worth 5,000 so it lost 5,000 a year
    30 - 4*5 = 10

    I do not know what day of the year April 12 is, about 3*30 + 12
    (that number /365) * 5000

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  2. The straight-line method for depreciation is a 5 step method
    1) Take the initial cost... $30,000
    2) subtract the salvage value (residual value) $30,000-$5000 = 25000
    3) Get the useful life ...in this case 5 years)
    4) divide the useful life into 1 and this gives the line depreciation ... 1/5 = 20%
    5) multiply the depreciation rate by the asset cost (less the salvage)... 20%x25000 = 5000 per year
    a) The book value at the end of year 5... start with your $30,000 and take off 5000 per year.
    Hope this helps : )

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  3. I love Damon's answer... as this was a gentle... use your head question : )

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  4. Thanks, but the second one was wrong. I think they want after April 12 to Dec 31.
    so 5000 * (365 - that number)/365
    Of course if they mean the full year from April 1 to April 1 it is 5,000

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