# Calculating Annual Depreciation Rate for a Truck

## How can we calculate the annual depreciation rate for a truck?

Given the truck was purchased for $188,000 with a salvage value of $32,000 and a monthly depreciation expense of $3,900 using the straight-line method.

## Calculating Annual Depreciation Rate for a Truck

To calculate the annual depreciation rate for the truck, we need to follow these steps:

**Step 1:**

Calculating the annual depreciation expense by multiplying the monthly expense by 12 months.

**Step 2:**

Determining the depreciable amount by subtracting the salvage value from the purchase price.

**Step 3:**

Calculating the annual depreciation rate by dividing the annual depreciation expense by the depreciable amount.

When we purchase an asset like a truck, it depreciates over time due to wear and tear. Depreciation is a way to allocate the cost of the asset over its useful life. In this case, the truck was purchased for $188,000 and is estimated to have a salvage value of $32,000 at the end of its useful life.

The monthly depreciation expense recorded using the straight-line method is $3,900. To find the annual depreciation rate, we first calculate the annual depreciation expense by multiplying the monthly expense by 12:

Annual depreciation expense = $3,900 x 12 = $46,800

Next, we determine the depreciable amount, which is the purchase price minus the salvage value:

Depreciable amount = $188,000 - $32,000 = $156,000

Finally, we calculate the annual depreciation rate by dividing the annual depreciation expense by the depreciable amount and multiplying by 100%:

Annual depreciation rate = ($46,800 / $156,000) x 100% = 30.00%

Therefore, the annual depreciation rate for the truck using the straight-line method is 30.00%.