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?

$4080

Explanation:

Straight line method of depreciation is a method of calculating depreciation expense of an asset after years of usage.

Given;

Initial cost of asset = $44,000

Salvage value = $3,200

After five years the asset has depreciated by ($44000-$3200) i.e

$40800

Depreciable asset cost = $40,800 (after 5years)

To determine the depreciation amount recorded during the first year ending 31st December;

Since the van was purchased July 1 of that year, by December 31 of the same year, the van must have been used only for 6months i.e (0.5year)

Depreciation expense = year of usage/total useful life × depreciable cost of asset

Depreciation expense = 0.5/5×$40,800

Depreciation expense = $20,400/5

Depreciation expense = $4080

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23