Downey Company bought a delivery truck for $62,000 on January 1, 2015. They installed a rear hydraulic lift for $8,000 and paid a sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000. If Downey uses the straight-line method of depreciation, what is the depreciation expense for 2016 and the book value at the end of 2016?

Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 4EB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is...
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Downey Company bought a delivery truck for $62,000 on January 1, 2015. They
installed a rear hydraulic lift for $8,000 and paid a sales tax of $3,000. In addition,
Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of
the truck to be 10 years and its residual value to be $8,000.
If Downey uses the straight-line method of depreciation, what is the depreciation
expense for 2016 and the book value at the end of 2016?
Transcribed Image Text:Downey Company bought a delivery truck for $62,000 on January 1, 2015. They installed a rear hydraulic lift for $8,000 and paid a sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000. If Downey uses the straight-line method of depreciation, what is the depreciation expense for 2016 and the book value at the end of 2016?
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