Question: Howe Chemicals Company acquires a delivery truck at a cost of $20,400 on January 1, 2014. The truck is expected to have a salvage value of $4,290 at the end of its 5-year useful . Compute annual depreciation for the first and second years using the straight-line method.
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Annual depreciation = Cost - Salvage Value/Estimated useful life = $20,400 - $4,290/5
= $3,222.
The annual depreciation for first year is $3,222
The annual depreciation for second year is $3,222
Depreciation for both the year will be same as straight-line depreciation method is used.
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