Question

A delivery van that cost $40,000 has an expected service life of eight years and a residual value of $4,000. Depreciation expense for the second year of the asset's life using the straight-line method is:__________

Answer 1

$4500

Step-by-step explanation:

Given: Purchase cost of Van= $40000

Estimated useful life= 8 years

residual value= $4000

As given we have to use straight line method for finding depreciation expense;

Formula, Depreciation expense=
`\frac{\textrm{Cost of the asset - residual value}}{estimated useful life}`

Annual depreciation expense=
`(40000 - 4000)/(8) = (36000)/(8)`

∴ Depreciation expense=
`\$ 4500.`

We know that in straight line method of depreciation, depreciation expense will remain same for all useful life of asset, however, book value changes.

∴ Depreciation expense for second year will also be $4500.