Canyon Company has a used delivery truck that originally cost $24,500. Straight-line depreciation on the truck has been recorded for three years, with a $2,000 expected salvage value at the end of its estimated six-year useful life. The last depreciation entry was made at the end of the third year. Four months into the fourth year, Canyon disposes of the truck. Required

Question

Warren

Business

7 November, 00:01

Canyon Company has a used delivery truck that originally cost $24,500. Straight-line depreciation on the truck has been recorded for three years, with a $2,000 expected salvage value at the end of its estimated six-year useful life. The last depreciation entry was made at the end of the third year. Four months into the fourth year, Canyon disposes of the truck. Required

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Areli Fox · Answer 1

Answer: The disposal of the truck is$14,500

Explanation:

Cost - Salvage value / Useful life

Cost = $24,500

Salvage value = $ 2,000

Useful life = 6years

24,500 - 2,000/6

= 22,500 / 6

= 3,750

Yearly depreciation = $3,750

Provision for depreciation

Ist year cost - depreciation (24,500 - 3,750) = 20,750

2nd year cost - depreciation (20,750 - 3,750) = 17,000

3rd year cost = 17,000,

Net Book value for the 3rd year = $17,000

Accumulated depreciation = 3,750 + 3,750 = 7,500

Four months into the fourth year depreciation = 4/12*7,500

= 2,500

Total accumulated depreciation = 2,500 + 7,500

= 10,000

Original cost - Accumulated depreciation = disposal of the truck

24,500 - 10,000 = 14,500

Therefore the machine will be disposed for $14,500