Chapter A, Problem 1P

A delivery van was bought for $18,000. The estimated life of the van is four years. The trade-in value at the end of four years is estimated to be $2,000.

Required

Prepare a depreciation schedule for the four-year period using the straight-line method.

Check Figure

Year 1 depreciation, $4,000

To determine

Prepare depreciation schedule for the four year estimated useful life of the delivery van under straight-line depreciation method.

Explanation of Solution

Straight-line method: The depreciation method which assumes that the consumption of economic benefits of long-term asset could be distributed equally throughout the useful life of the asset, is referred to as straight-line method.

Formula for straight-line depreciation method:

$\text{Depreciation expense}=\frac{\text{Cost of asset–Trade-in value}}{\text{Yeasr in life}}$

Prepare depreciation schedule for the four year estimated useful life of the delivery van under straight-line depreciation method, if cost of the asset is $18,000 and trade-in value is $2,000.

Table (1)