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24 March, 18:14

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?

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  1. 24 March, 19:15
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    Depreciation till December 31, Year 1 will be equal to 1,250$

    Step-by-step explanation:

    Purchasing Cost = 28,000$

    Salvage Value = 3,000$

    Total Depreciation:

    Total Depreciation over 5 years (60 Months) = Purchasing Cost - Salvage Value

    Total Depreciation over 5 years (60 Months) = 28,000 - 3,000

    Total Depreciation over 5 years (60 Months) = 25,000$

    Monthly Depreciation:

    Using the unity method we have monthly depreciation by dividing the total depreciation by the total no. of months as below:

    Total Depreciation over a single month = 25,000/60

    Total Depreciation over a single month = 416.67$ (Monthly Depreciation)

    Depreciation till December 31, Year 1

    As from September 1, Year 1 to December 31, Year 1, its been 3 months therefore total depreciation will be = 3 * Monthly Depreciation

    Depreciation till December 31, Year 1 = 3 * 416.67

    Depreciation till December 31, Year 1 = 1,250$
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