Natalie is also thinking of buying a van that will be used only for business. The cost of the van is estimated at $38,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last her about 5 years, and she expects to drive it for 100,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $6,500. Assume that she will buy the van on August 15, 2024, and it will be ready for use on September 1, 2024. Natalie is concerned about the impact of the van's cost on her income statement and balance sheet. She has come to you for advice on calculating the van's depreciation. Determine the cost of the van. Cost of van $ 42500 Prepare a depreciation table for straight-line depreciation. Recall that Cookie Creations has a December 31 fiscal year-end, so annual depreciation depreciation will have to be prorated for the portion of the year the van is used in 2024 and 2029.
Natalie is also thinking of buying a van that will be used only for business. The cost of the van is estimated at $38,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last her about 5 years, and she expects to drive it for 100,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $6,500. Assume that she will buy the van on August 15, 2024, and it will be ready for use on September 1, 2024. Natalie is concerned about the impact of the van's cost on her income statement and balance sheet. She has come to you for advice on calculating the van's depreciation. Determine the cost of the van. Cost of van $ 42500 Prepare a depreciation table for straight-line depreciation. Recall that Cookie Creations has a December 31 fiscal year-end, so annual depreciation depreciation will have to be prorated for the portion of the year the van is used in 2024 and 2029.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Natalie is also thinking of buying a van that will be used only for business. The cost of the van is estimated at $38,500. Natalie would
spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots
of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving
units is estimated at $1,500. She expects the van to last her about 5 years, and she expects to drive it for 100,000 miles. The annual
cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $6,500. Assume
that she will buy the van on August 15, 2024, and it will be ready for use on September 1, 2024.
Natalie is concerned about the impact of the van's cost on her income statement and balance sheet. She has come to you for advice on
calculating the van's depreciation.
Determine the cost of the van.
Cost of van $
Prepare a depreciation table for straight-line depreciation. Recall that Cookie Creations has a December 31 fiscal year-end, so
annual depreciation depreciation will have to be prorated for the portion of the year the van is used in 2024 and 2029.
Year
42500
Depreciable Cost
Annual Depreciation
Expense
End of Year
Accumulated Depreciation
Book Value
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