Question

What is the annual depreciation amount of a Toyota Tundra using the straight-line method, given an initial cost of $30,000, a residual value of $5,000 and an estimated life of 5 years?

Answer 1

To calculate the annual depreciation amount using the straight-line method, you can use the following formula:

\[
\text{Annual Depreciation} = \frac{\text{Initial Cost} - \text{Residual Value}}{\text{Estimated Life}}
\]

Given:
- Initial Cost = $30,000
- Residual Value = $5,000
- Estimated Life = 5 years

Now, plug the values into the formula:

\[
\text{Annual Depreciation} = \frac{30,000 - 5,000}{5}
\]

Calculating the numerator:

\[
30,000 - 5,000 = 25,000
\]

Now divide by the estimated life:

\[
\text{Annual Depreciation} = \frac{25,000}{5} = 5,000
\]

Therefore, the annual depreciation amount for the Toyota Tundra is **$5,000**.