Question

Gleason purchased a used van for use in its business on January 1,2020 . It paid $15,000 for the van. Gleason expects the van to have a useful life of four years, with an estimated residual value of $1,200. Gleason expects to drive the van 31,000 miles during 2020, 40,000 miles during 2021, 14,000 miles in 2022, and 7,000 miles in 2023, for total expected miles of 92,000 . Read the requirements. (Complete all input fields. Enter a "0" for any zero values.) Year Annual Depreciation Expense Acumulated Deprecitation Book Value Start 2020 2021 2022 2023

Answer 1

Gleason purchased a used van for its business at $15,000 with an estimated residual value of $1,200. The annual depreciation expense for the van is $3,200, calculated using the straight-line depreciation method. The accumulated depreciation and book value for each year can be determined based on this information.

Step-by-step explanation:

In this scenario, Gleason purchased a used van for its business for $15,000. The van is expected to have a useful life of 4 years and an estimated residual value of $1,200. Gleason also expects to drive the van for a total of 92,000 miles over the next 4 years.

To calculate the annual depreciation expense, we can use the straight-line depreciation method. The formula for straight-line depreciation is:

Annual Depreciation Expense = (Cost - Residual Value) / Useful Life

Therefore, the annual depreciation expense for the van is: ($15,000 - $1,200) / 4 = $3,200.

Using this information, we can calculate the accumulated depreciation and the book value of the van for each year:

YearAnnual Depreciation ExpenseAccumulated DepreciationBook Value2020$3,200$3,200$11,8002021$3,200$6,400$8,6002022$3,200$9,600$5,4002023$3,200$12,800$2,200

Answer 2

In the last year, 2023, we accounted for another $3,450 in depreciation expense. This increases the accumulated depreciation to $13,800. At the same time, the book value drops to $1,200.

Year Annual Depreciation Expense Accumulated Depreciation Book Value

2020 $3,450 $3,450 $11,550

2021 $3,450 $6,900 $8,100

2022 $2,275 $9,175 $5,825

2023 $1,150 $10,325 $4,675

When we calculate annual depreciation using the straight-line method, we're dividing the van's cost ($15,000 - $1,200) over its useful life of 4 years. Each year, we're assigning $3,450 as the depreciation expense.

In the first year, which is 2020, the total accumulated depreciation amounts to $3,450. At the beginning of the year, the book value (the van's value on our books) is $11,550 ($15,000 - $3,450).

Moving to the next year, 2021, we're adding another $3,450 in depreciation expense, which results in a total accumulated depreciation of $6,900. The book value decreases to $8,100.

As we enter 2022, we include an additional $3,450 in depreciation. Now, the total accumulated depreciation reaches $10,350, and the book value lowers to $4,650.

Finally, in the last year, 2023, we account for another $3,450 in depreciation expense. This increases the accumulated depreciation to $13,800. At the same time, the book value drops to $1,200.

This method makes sure that we evenly distribute the van's cost over its expected useful life.