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A company purchased a delivery van for $30,000 with a salvage value of $6,000 on July...

A company purchased a delivery van for $30,000 with a salvage value of $6,000 on July 1, Year 1. It has an estimated useful life of 4 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?

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Answer #1

Cost of delivery van = $30,000

Salvage value = $6,000

Estimated useful life = 4 years

Annual depreciation expense = (Cost of delivery van - Salvage value)/Estimated useful life

= (30,000 - 6,000)/4

= $6,000

Since delivery van was purchased on July 1, Year 1, hence for year 1, depreciation expense will be provided for 6 months only.

Depreciation expense for year 1 = Annual depreciation expense x 1/2

= 6,000 x 1/2

= $3,000

Using the straight-line method, depreciation expense to be recognized on December 31, Year 1 = $3,000

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