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23 May, 02:48

A company purchased a delivery van for $31,900 with a salvage value of $3,700 on September 1, Year 1. It has an estimated useful life of 6 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?

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  1. 23 May, 03:14
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    The answer is $1,566.67

    Explanation:

    The formula for Straight line depreciation is:

    Cost of an asset - [residual (salvage) value] : number of useful of the asset.

    Cost = $31,900

    Salvage value = $3,700

    Useful number of years = 6 years

    = ($31,900 - $3,700) : 6

    $4,700.

    The depreciation for a year is $4,700.

    But September 1 to December 31st is 4 months.

    Therefore, the company should recognize

    $1,566.67[ ($4,700 : 12months) x 4months] as depreciation expense on December 31, Year 1
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