Your Company purchased a truck for $95,000 on January 2 of year one. The truck w

Question

Your Company purchased a truck for $95,000 on January 2 of year one. The truck was estimated to have a $3,000 salvage value and a 4 year life. The truck was depreciated using the straight-line method. At the beginning of the 4th year, the company spent $30,000 on a major renovation that extended the useful life by another four years. The salvage at the end of its useful life would be $4,500. Determine the depreciation expense for the truck for the fourth year. ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS.

Explanation / Answer

Calculate depreciation expense for the fourth year :

Depreciation expense for fourth year is $10300

Original cost 95000 Depreciation per year (95000-3000/4) 23000 Accumlated depreciation for 3 year (23000*3) 69000 Book value at the beginning of 4th year (95000-69000) 26000 Major renovation 30000 Total depreciable cost 56000 Depreciation expense for 4th year (56000-4500/5) 10300

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