Depreciation

Assume that you recently applied for a student loan to go to graduate school. As part of the application process, your bank requested a list of your assets. Aside from an extensive CD collection, your only other asset is a pickup truck. You purchased the truck six years ago for $15,000. Its current fair value is approximately $5,000.

1.) What factors caused your pickup truck to decline $10,000 in value?

2.) Assume that the bank is willing to lend you money for graduate school based on your positive credit rating. Even with the loan, however, you still need to raise an additional $5,000. Do you think that the bank will lend you $5,000 more for graduate school if you agree to use your truck as collateral? Explain.

3.) Assume that the truck has been used solely in a delivery service business that you operate while in college. Would your balance sheet necessarily show $10,000 in accumulated depreciation related to the truck? Explain.