Question

Required:

Calculate depreciation expense using the straight-line method for 2018 and 2019, assuming a December 31 year-end.

E7–13 Tasty Subs acquired a delivery truck on October 1, 2018, for $21,600. The company estimates a residual value of $1,200 and a six-year service life.

Answer 1

$567 and $3,400

Step-by-step explanation:

The computation of the depreciation expense under the straight-line method is shown below:

We know that

= (Acquired value of delivery truck - residual value) ÷ (service life)

= ($21,600 - $1,200) ÷ (6 years)

= ($20,400) ÷ (6 years)

= $3,400

Since the delivery truck is purchased on October 1 so, for the year 2018, the depreciation should be charged for only 2 months i.e

= $3,400 × ,400(2 months ÷ 12 months)

= $567

In this method, the depreciation expense is the same for all the service life i.e for the year 2019 it would be $3,400