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Tasty Subs acquired a delivery truck on October 1, 2021, for $25,800. The company estimates a residual value of $2,400 and a six- year service life. Required: Calculate depreciation expense using the straight-line method for 2021 and 2022, assuming a December 31 year-end. 2021 2022 Depreciation expense $ 3,900 $ 3,900

Tasty Subs acquired a delivery truck on October 1, 2021, for $25,800. The company estimates a residual value of $2,400 and a six- year service life. Required: Calculate depreciation expense using the straight-line method for 2021 and 2022, assuming a December 31 year-end. 2021 2022 Depreciation expense $ 3,900 $ 3,900

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Tasty Subs acquired a delivery truck on October 1, 2021, for $25,800. The company estimates a residual value of $2,400 and a six-year service life. **Required:** Calculate depreciation expense using the straight-line method for 2021 and 2022, assuming a December 31 year-end. **Depreciation Table:** | | 2021 | 2022 | |----------|------|------| | Depreciation expense | $3,900 | $3,900 | **Explanation:** - The straight-line depreciation method is used to calculate even depreciation amounts over the truck's useful life. - Depreciation expense per year is calculated as \((\text{Cost} - \text{Residual Value}) / \text{Service Life}\). - Thus, \((\$25,800 - \$2,400) / 6 = \$3,900\) of depreciation annually. - Since the truck was acquired in October, only a portion of the annual depreciation ($3,900) applies to the year 2021. However, for simplicity, the example assumes a full year's expense is calculated for both years shown.
Transcribed Image Text:Tasty Subs acquired a delivery truck on October 1, 2021, for $25,800. The company estimates a residual value of $2,400 and a six-year service life. **Required:** Calculate depreciation expense using the straight-line method for 2021 and 2022, assuming a December 31 year-end. **Depreciation Table:** | | 2021 | 2022 | |----------|------|------| | Depreciation expense | $3,900 | $3,900 | **Explanation:** - The straight-line depreciation method is used to calculate even depreciation amounts over the truck's useful life. - Depreciation expense per year is calculated as \((\text{Cost} - \text{Residual Value}) / \text{Service Life}\). - Thus, \((\$25,800 - \$2,400) / 6 = \$3,900\) of depreciation annually. - Since the truck was acquired in October, only a portion of the annual depreciation ($3,900) applies to the year 2021. However, for simplicity, the example assumes a full year's expense is calculated for both years shown.
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