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On January 1, 2019, Wasson Company purchased a delivery vehicle costing $45,200. The vehicle has an estimated 7-year life and a $3,900 residual value. What is the vehicle's book value as of December 31, 2020, assuming Wasson uses the straight-line depreciation method

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Answer: $33,400

Explanation:

The annual depreciation using the straight-line method is;

= (Cost - Residual value) / Useful life

= (45,200 - 3,900) / 7

= $5,900

On December 31, 2020, the vehicle would have depreciated by 2 years so the book value would be;

= Cost - Accumulated depreciation

= 45,200 - (5,900 + 5,900)

= $33,400

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