Paul Company purchased a dump truck for $25,000. In addition, Paul Company paid freight charges of $500, and $800 to paint the company's logo on the truck. The estimated salvage value and useful life are $3,800 and 5 years, respectively. How much is the accumulated depreciation under the straight-line method after three years?

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1 November, 05:55

Paul Company purchased a dump truck for $25,000. In addition, Paul Company paid freight charges of $500, and $800 to paint the company's logo on the truck. The estimated salvage value and useful life are $3,800 and 5 years, respectively. How much is the accumulated depreciation under the straight-line method after three years?

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Willow Chapman · Answer 1

Accumulated depreciation = $13,500

Explanation:

Giving the following information:

Paul Company purchased a dump truck for $25,000. Also, Paul Company paid freight charges of $500, and $800 to paint the company's logo on the truck. The estimated salvage value and useful life are $3,800 and 5 years, respectively.

First, we need to calculate the total buying price for the truck.

We need to include the freight and everything required to make it work.

Buying price = 25,000 + 500 + 800 = $26,300

Now, using the following formula, we can calculate the accumulated depreciation:

Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (26,300 - 3,800) / 5 = 4,500

After 3 years:

Accumulated depreciation = 4,500*3 = $13,500