Answer:
a. Compute the acquisition cost of the van.
van's basis = $45,000 (the van) + $3,800 (sales tax) + $700 (logo) = $49,500
When you purchase an asset, its basis must include the cost of the asset, any freight costs, taxes associated with the sale, any applicable insurance expense, installation costs and or any modifications necessary.
b. Compute the depreciation expense to be reported for Year 1.
depreciable value = $49,500 - $4,500 = $45,000
depreciation expense per year = $45,000 / 5 = $9,000
December 31, 202x, depreciation expense
Dr Deprecation expense 9,000
Cr Accumulated depreciation: van 9,000
