Question

A company purchased a new delivery van at a cost of $44,000 on July 1. The delivery van is estimated to have a useful life of 5 years and a salvage value of $3,200. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the van during the first year ended December 31?

Answer 1

$4080

Step-by-step explanation:

Straight line method of depreciation is a method of calculating depreciation expense of an asset after years of usage.

Given;

Initial cost of asset = $44,000

Salvage value = $3,200

After five years the asset has depreciated by ($44000-$3200) i.e

$40800

Depreciable asset cost = $40,800 (after 5years)

To determine the depreciation amount recorded during the first year ending 31st December;

Since the van was purchased July 1 of that year, by December 31 of the same year, the van must have been used only for 6months i.e (0.5year)

Depreciation expense = year of usage/total useful life × depreciable cost of asset

Depreciation expense = 0.5/5×$40,800

Depreciation expense = $20,400/5

Depreciation expense = $4080