A New Truck Costing $60,000 with a Residual Value of $6,000

question 68

Multiple Choice

A new truck costing $60,000 with a residual value of $6,000 has an estimated useful life of five years. Using the declining-balance method at twice the straight-line rate, the depreciation expense in year 2 is:

• A)$24,000
• B)$14,000
• C)$14,400
• D)$2,400
• E)None of these

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Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business, such as sales volume or production levels.

Fixed Expenses

Costs that do not fluctuate with the volume of production or sales, such as rent, salaries, and insurance premiums.

Target Profit

The amount of net income a business aims to achieve within a specific period.

Break-Even Point

The level of production or sales at which total revenues equal total expenses, resulting in no net profit or loss.