A company purchased a delivery van for $23,000 with a salvage value of $3,000 on September 1,2014.It has an estimated useful life of five years.Using the straight-line method,how much depreciation expense should the company recognize on December 31,2014?
A)$1,000
B)$1,333
C)$1,533
D)$4,000
E)$4,600

Question

Quizplus · Accepted Answer

To calculate depreciation using the straight-line method, we need to subtract the salvage value from the purchase price and divide that amount by the estimated useful life.

$23,000 - $3,000 = $20,000 (this is the depreciable cost)
$20,000 ÷ 5 = $4,000 (this is the annual depreciation expense)
Since the company purchased the van on September 1, we need to prorate the depreciation expense for the four months it was in use in 2014:
4/12 x $4,000 = $1,333
Therefore, the company should recognize $1,333 in depreciation expense on December 31, 2014. The correct answer is B.

A Company Purchased a Delivery Van for $23,000 with a Salvage