Question

A sight-seeing company buys a passenger van to take customers on excursions. the cost of the van is $57,000. the expected useful life of the van is 12 years after which it can be sold for $2,000. the company uses the straight-line depreciation method to keep up with the value of its equipment. What is the total depreciation for the van

Answer 1

To find the total depreciation for the van, subtract the salvage value from the initial cost, and divide by the useful life to get the annual depreciation, then multiply by the useful life. The total depreciation over 12 years is $55,000.

Step-by-step explanation:

The total depreciation for the van using the straight-line depreciation method can be calculated by first determining the annual depreciation expense. This is done by subtracting the salvage value from the initial cost and then dividing by the useful life of the asset. In this case, the van cost $57,000 and has a salvage value of $2,000 at the end of its 12 year useful life.

Annual Depreciation Expense = (Initial Cost - Salvage Value) / Useful Life = ($57,000 - $2,000) / 12 years = $55,000 / 12 years = $4,583.33 per year.

Therefore, the total depreciation over the 12 years will be the annual depreciation expense multiplied by the number of years, which is $4,583.33 * 12 = $55,000.