Required informationSkip to question[The following information applies to the questions displayed below.]On January 1, 2024, the Excel Delivery Company purchased a delivery van for $35,700. At the end of its five-year service life, it is estimated that the van will be worth $3,000. During the five-year period, the company expects to drive the van 109,000 miles.Required:Calculate annual depreciation for the five-year life of the van using each of the following methods.1. Straight line.
Question
Required informationSkip to question[The following information applies to the questions displayed below.]On January 1, 2024, the Excel Delivery Company purchased a delivery van for 3,000. During the five-year period, the company expects to drive the van 109,000 miles.Required:Calculate annual depreciation for the five-year life of the van using each of the following methods.1. Straight line.
Solution
To calculate the annual depreciation for the five-year life of the van using the straight-line method, follow these steps:
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Determine the cost of the asset: The cost of the van is $35,700.
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Determine the residual value of the asset: The estimated worth of the van at the end of its service life is $3,000.
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Determine the useful life of the asset: The van is expected to be in service for 5 years.
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Calculate the depreciation expense: Subtract the residual value from the cost of the asset and then divide by the useful life of the asset.
So, the calculation would be: (3,000) / 5 = $6,540
Therefore, the annual depreciation of the van using the straight-line method is $6,540.
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