Question

Ivorycoast, Inc. purchased a van on January 1, 2017, for $890,000. Estimated life of the van was five years, and its estimated residual value was $98,000. Ivorycoast uses the straight-line method of depreciation. Calculate the book value of the van at the end of 2017.

Answer 1

Answer:

$731,600

Explanation:

For computing the book value, first we have to determine the depreciation expense which is shown below:

So, under the straight-line method, the depreciation expense would be

= (Original cost - residual value) ÷ (useful life)  

= ($890,000- $98,000) ÷ (5 years)  

= ($792,000) ÷ (5 years)  

= $158,400

In this method, the depreciation is same for all the remaining useful life

Now the book value would be

= Acquired value of an asset - depreciation  expense

= $890,000 - $158,400

= $731,600