John Morse Corporation buys a van for $16,000. The estimated life of the van is
ID: 2721160 • Letter: J
Question
John Morse Corporation buys a van for $16,000. The estimated life of the van is 4 years. The residual value of the van is $4,000. After 2 years, the van has been sold for $8,000. What was the difference between the book value and the amount received from selling the van if John used the straight-line method of depreciation?
None of the Choices
$4000 difference
$8000 difference
$3000 difference
$2000 difference
A.None of the Choices
B.$4000 difference
C.$8000 difference
D.$3000 difference
E.$2000 difference
Explanation / Answer
Van cost=$16,000
Estimated life=4 years
Residual value=$4,000
Depreciation per year= (16,000-4,000)/4
=3,000
Book value after 2 year=$16,000-3,000-3,000
=$10,000
Difference between the book value and the amount received
=$10,000-$8,000
=$2000
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