Question

A car was purchased for $10,000 with a salvage value of $4000. It is expected to have a useful life of 5 years. Using the sum-of-years method, find the car's value in the first year after the purchase.

Answer 1

The car is expected to decrease in value $6,ooo in five years (10,000 - 4,000). How much is that per year? Then subtract the yearly depreciation from the purchase price to find the value at the end of the first year.