young Corporation bought a car with an estimated life of fiv

young Corporation bought a car with an estimated life of five years for $25,000. The residual value of the car is $ 5,000. After three years, the car was sold for $11,000. What was the difference between book value and selling price if Young Corporation used the straight-line method of depreciation?

Solution

Here rule is that depreciation = (cost - residual value)/ useful life

So here depreciation after 3 years = (25000- 5000)/5 x 3 = 20000/5 x 3= 4000 x 3 = 12000

Now Book value = cost - accumulated depreciation = 25000 - 120000= $ 13000

So difference between book value and selling price = $ 13000 - $ 11000 = $ 2000

so last answer is $ 2000.