12 Events related to the acquisition, use, and disposal of a tangible plant asse
ID: 2419131 • Letter: 1
Question
12 Events related to the acquisition, use, and disposal of a tangible plant asset: straight-line depreciation LO 6-3, 6-4
Sam’s Subs purchased a delivery van on January 1, 2014, for $28,500. In addition, Sam’s paid sales tax and title fees of $1,240 for the van. The van is expected to have a four-year life and a salvage value of $5,200.
Using the Straight-Line method, compute the depreciation expense for 2014 and 2015. (Round your answers to the nearest whole dollar amount.)
DEPRECIATION EXPENSE
2014
2015
b Assume the van was sold on January 1, 2017, for $13,035. Determine the amount of gain or loss that would be recognized on the asset disposal. (Round the intermediate calculations to nearest whole dollar amount.)
GAIN ON SALE ( )
Sam’s Subs purchased a delivery van on January 1, 2014, for $28,500. In addition, Sam’s paid sales tax and title fees of $1,240 for the van. The van is expected to have a four-year life and a salvage value of $5,200.
Explanation / Answer
a) total cost of van = $28,500+$1,240 = $29,740
Straight line depreciation = (Total cost - salvage value)/ Estimated life
=($29,740 -$5,200)/4
= $6,135
Depreciation for 2014 And 2015 = $6,135
b)Depreciation for the year 2014 - 2016 = 6,135*3 = $18,405
Book value of Van =$29,740 - $18,405
=$11,335
Cash from sale =13,035
Gain on sale = $13,035 - 11,335 = $1,700
a) total cost of van = $28,500+$1,240 = $29,740
Straight line depreciation = (Total cost - salvage value)/ Estimated life
=($29,740 -$5,200)/4
= $6,135
Depreciation for 2014 And 2015 = $6,135
b)Depreciation for the year 2014 - 2016 = 6,135*3 = $18,405
Book value of Van =$29,740 - $18,405
=$11,335
Cash from sale =13,035
Gain on sale = $13,035 - 11,335 = $1,700
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