Question

A company purchased a delivery van for $28,400 with a salvage value of $3,900 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

Answer 1

The deprecation expense in year 1 is $1225.

What is the depreciation expense in year 1?

Depreciation is a method that is used to expense the carrying value of an asset. Straight line depreciation is a depreciation method that allocates the deprecation expense evenly across the useful life of the asset.  

Straight line depreciation expense is a function of the useful life of the asset, the cost of the asset and the salvage value of the asset.

Straight line depreciation expense = (number of months from Sept to Dec / number of months in a year) x (Cost of asset - Salvage value) / useful life

(3/12) x [(28,400 - 3900) / 5]

1/4 x (24,500/5) = $1225

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