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A company purchased a delivery van for $15,500 with a salvage value of $2,300 on September 1, Year 1. It has an estimated useful life of 4 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1? 1. $3,875. 2. $825. 3. $3,300. 4. $1,100. 5. $1,292.

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Answer:

4) $1,100

Explanation:

To calculate the depreciation cost of the van we can use the following equation:

depreciation cost per month = (purchase cost - salvage value) / useful life in months

depreciation cost per month = ($15,500 - $2,300) / (12 months x 4 years) = $13,200 / 48 months = $275 per month

Since the company used the van for 4 months (September - December) then we multiply the depreciation cost per month times 4 months = $275 x 4 = $1,100

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