Question

On January​ 1, 2017 Smart Touch Learning purchases a van for $ 15000 with an estimated useful life of 5 years and an estimated residual value of $ 3 000. On January​ 1, 2020​, Smart Touch Learning revises the estimated residual value of the van from $ 3000 to​ $0. What is depreciation expense for 2020 using the​ straight-line depreciation​ method?

Answer 1

The depreciation expense for 2020 using the straight-line method is $7,500.

Step-by-step explanation:

The annual depreciation expense for 2020 using the straight-line depreciation method can be calculated by subtracting the revised estimated residual value from the initial cost of the van and dividing it by the remaining useful life. In this case, the initial cost of the van is $15,000 and the revised estimated residual value is $0. Since the van was purchased on January 1, 2017, it has already been used for 3 years out of its total useful life of 5 years. Therefore, the remaining useful life is 5 - 3 = 2 years.

Depreciation expense = (Initial cost - Revised residual value) / Remaining useful life

= ($15,000 - $0) / 2

= $15,000 / 2

= $7,500

Therefore, the depreciation expense for 2020 using the straight-line depreciation method is $7,500.