Spencer Company purchased a tractor at a cost of $360,000 on January 1, 2019. The tractor has an estimated salvage value of $60,000 and an estimated life of 8 years. If Spencer uses the straight-line method, what is the book value at January 1, 2023

$210,000

Explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

( $360,000 - $60,000) / 8 = $37,500

Depreciation expense each year of the useful life would be $37,500.

Book value in 2023 = Cost of asset - accumulated deprecation

There are 4 years between January 1, 2019 and January 1, 2023.

Accumulated depreciation = $37,500 x 4 = $150,000

Book value = $360,000 - $150,000 = $210,000

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