Gulfcoast, Inc. purchased a van on January 1, 2019, for $ 900 comma 000. Estimated life of the van was five years, and its estimated residual value was $ 101 comma 000. Gulfcoast uses the straightminusline method of depreciation. Calculate the book value of the van at the end of 2019.

$740,200

Explanation:

Depreciation is the systematic allocation of the cost of an asset to the income statement over the estimated useful life of that asset.

It is determined as the depreciable value of the asset over the estimated useful life of the asset where the depreciable value is the difference between the cost and salvage value of the asset

Mathematically,  

Depreciation = (Cost - Salvage value)/Estimated useful life

Depreciation = (900,000 - 101,000)/5

= $159,800

Book value is the cost net accumulated depreciation

= $900,000 - $159,800

= $740,200

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