A company purchased a new delivery van at a cost of $44,000 on July 1. The delivery van is estimated to have a useful life of 5 years and a salvage value of $3,200. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the van during the first year ended December 31? ___ $3,840 ___ $4,080 ___ $4,720 ___ $8,160
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A company purchased a new delivery van at a cost of $44,000 on July 1. The delivery van is estimated to have a useful life of 5 years and a salvage value of $3,200. The company uses the straight-line method of
___ $3,840
___ $4,080
___ $4,720
___ $8,160
Using straight line method of depreciation :-
Depreciation expense = ( Cost of asset - Salvage value ) / Useful life of asset
Date of purchase of Delivery Van = July 1
Date of year end = December 31
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