After 5 years the depreciation cost is $7200; accumulated depreciation expense is $36000 and book value at the end of year is $4000.
Given,
Cost of auto =$40,000
Residual value =$4000
Estimated lifetime =5 years
Straight-line Method:-
Depreciation cost can be calculated by formula,
[tex]Depreciation=\frac{cost\ of\ assest-residual}{estimated\ lifetime}[/tex]
It is constant for every year.
Accumulated depreciation can be calculated by formula,
[tex]Accumulation\ Depreciation=\frac{cost\ of\ assets-residual}{estimated\ lifetime}*Number\ of\ years[/tex]
Book value at start of year is nothing the cost of asset at that year and Book value at end of year is difference between cost of asset at that year and depreciation cost.
Using the above formulas all the values for each year is caculated and formed into a table.
Year BookValue DepreciationCost Accumulation Book Value
Start End
1 $40,000 $7,200.00 $7,200 $32,800
2 $32,800 $7,200.00 $14,400 $25,600
3 $25,600 $7,200.00 $21,600 $18,400
4 $18,400 $7,200.00 $28,800 $11,200
5 $11,200 $7,200.00 $36,000 $4,000
Thus, after 5 years the depreciation cost is $7200; accumulated depreciation expense is $36000 and book value at the end of year is $4000.
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