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Omaha Beef Company purchased a delivery truck for $66,000. The residual value at the end of an estimated eight-year service life is expected to be $12,000. The company uses straight-line depreciation for the first six years. In the seventh year, the company now believes the truck will be useful for a total of 10 years (four more years), and the residual value will remain at $12,000. Calculate depreciation expense for the seventh year.

Respuesta :

Given:

Company purchased = $66000

Find-:

Depreciation expense for the seventh year

Sol:

First, depreciate for 6 years using the regular method:

[tex]\begin{gathered} =\frac{\text{ Cost - salvage value}}{\text{ initial useful life}} \\ \\ =\frac{66000-12000}{8} \\ \\ =6750 \end{gathered}[/tex]

The annual depreciation is 6750.

For 6 years

[tex]\begin{gathered} =6750\times6 \\ \\ =40500 \end{gathered}[/tex]

So

[tex]\begin{gathered} \text{ Remaining useful life = 10-6} \\ =4 \\ \\ =\frac{66000-40500-12000}{4} \\ \\ =\frac{13500}{4} \\ \\ =3375 \end{gathered}[/tex]

For seventh-year depreciation expense is $3375

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