Downey Company bought a delivery truck for $62,000 on January 1, 2005. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.
If Downey uses the straight-line method of depreciation, what is the depreciation expense for 2006 and book value at the end of 2006?
a) $7,300 and $58,400
b) $6,500 and $60,000
c) $6,790 and $62,320
d) $6,500 and $66,500