Use the following information to answer the question:
Cost of car: $26,000
Residual value: $6,000
Life: 5 years
What is the question?
To answer the question, we need to calculate the annual depreciation of the car. The annual depreciation is the difference between the initial cost of the car and its residual value, divided by the number of years it is expected to last.
First, subtract the residual value from the cost of the car to find the total depreciation: $26,000 - $6,000 = $20,000.
Next, divide the total depreciation by the number of years the car is expected to last (5 years): $20,000 / 5 = $4,000.
Therefore, the annual depreciation of the car is $4,000.