Question

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?

Answer 1

Answer:

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