A Truck Costs $16,000 with a Residual Value of $1,000

question 46

Multiple Choice

A truck costs $16,000 with a residual value of $1,000. It has an estimated useful life of five years. If the truck was bought on July 3, what would be the book value at the end of year 1 using straight-line rate?

• A)$16,000
• B)$12,500
• C)$14,500
• D)$1,500
• E)None of these

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Definitions:

Paid-In Capital

The amount of money that a company receives from shareholders in exchange for shares of stock, exceeding the par value of the shares.

Drawings

Withdrawal of cash or other assets from an unincorporated business for the personal use of the owner(s).

Authorized Shares

The maximum number of shares that a corporation is legally allowed to issue, as specified in its articles of incorporation.

Market Value

The existing cost for buying or selling an asset or service on the market.