If a forklift has an initial value of $12,000, salvage value of $0, and a useful life of 6 years, what is the accumulated depreciation after 3 years?

If a forklift has an initial value of $12,000, salvage value of $0, and a useful life of 6 years, what is the accumulated depreciation after 3 years?

• A. $8,000
• B. -$8,000
• C. $6,000
• D. -$6,000

Answer: (D)

The key idea is straight-line depreciation and how accumulated depreciation is shown as a contra-asset. With a cost of 12,000, salvage value of 0, and a useful life of 6 years, the yearly depreciation is (12,000 − 0) / 6 = 2,000. After 3 years, accumulated depreciation totals 3 × 2,000 = 6,000. Accumulated depreciation is a contra-asset account, which is presented as a deduction to the asset and often shown as a negative balance. So the accumulated depreciation after 3 years is 6,000 in magnitude, represented as -6,000 in formats that show the contra-asset as a negative amount. This matches the selected option.

The key idea is straight-line depreciation and how accumulated depreciation is shown as a contra-asset. With a cost of 12,000, salvage value of 0, and a useful life of 6 years, the yearly depreciation is (12,000 − 0) / 6 = 2,000. After 3 years, accumulated depreciation totals 3 × 2,000 = 6,000. Accumulated depreciation is a contra-asset account, which is presented as a deduction to the asset and often shown as a negative balance. So the accumulated depreciation after 3 years is 6,000 in magnitude, represented as -6,000 in formats that show the contra-asset as a negative amount. This matches the selected option.