Question

SportsWorld purchased a delivery van for $23,000 with a residual value of $3,000 on September 1, 2019. The van has an estimated useful life of 5 years. Using the straight-line method, how much depreciation should SportsWorld recognize on December 31, 2019? Group of answer choices $2,667 $4,600 $1,333 $4,000

Answer 1

Answer:

$1,333

Explanation:

The computation of the deprecation expense is shown below:

= (Original cost - residual value) ÷ estimated useful life

= ($23,000 - $3,000) ÷ 5 years

= $4,000

This $4,000 depreciation expense come for a year but the asset is purchased on September 1, 2019 and the books are closed on December 31, 2019

So, the four months depreciation expense would be

= Yearly depreciation expense × number of months ÷ (total number of months in a year)

= $4,000 × (4 months ÷ 12 months)

= $1,333.33

The four months is calculated from September 1 to December 31