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Green Company purchases a truck for $30,000 on the first day of the year. Green Company uses straight-line depreciation and estimates the residual value on the truck to be $5,000. The truck's estimated service life is 5 years. What is the amount of depreciation expense for the first year the truck is in operation?

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Answer:

$5,000

Explanation:

The depreciation by Green Company in respect of truck for the first year of operations shall be calculated using the following mentioned formula;

Depreciation for the year=  (Cost of asset-Residual value)/useful life

Cost of asset=$30,000

Residual value=$5,000

useful life=5

Depreciation for the year=($30,000-$5,000)/5=$5,000

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