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A company purchased a delivery van for $18,200 with a salvage value of $2,200 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1

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ayokenny2001

Answer:

$1,066.67

Explanation:

Using straight line method, depreciation expense is constant throughout the life of an asset.

Depreciation is calculated as seen below;

Depreciation = Cost of asset - Residual value

= $18,200 - $2,200

= $16,000

Depreciation rate = 1/5 × 100

= 20 percent

Depreciation per year = 20/100 × 16,000

= $3,200

During the year 1, the van operated for four months (Sept, Oct, Nov and Dec)

Depreciation for the four months = 4/12 × 3,200

= $1,066

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