Saturday, February 9, 2008

Depreciation of an Asset and Book Value

A Small Business Loan Company purchased a truck at a cost of $56,000 on January 1, 2000. The truck is expected to have a useful life of 8 years, and a salvage value of $12,000. After the adjustments are recorded and posted to the accounting records on December 31, 2004, the book value of the truck is:

( 56000 - 12000 ) / 8 = 5500 per year

Jan 1, 2000 - Dec 31, 2004 ===> 5 years

The total auto depreciation cost for the truck for 5 years is 5500 x 5 = 27500
You then must subtract this value from the purchase price of the truck:

56000 - 27500 = 28500

Book Value of Truck: 28500

Additional Links to Accounting Problems and Examples:
Asset Historical Cost Examples
Straight Link Depreciation Example
Depreciation of an Asset and Book Value

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