Pete’s Pizza purchased a delivery van on January 1, Year 1, for $35,000. In addition, Pete’s paid sales tax and title fees of $1,500 for the van. The van is expected to have a four-year life and a salvage value of $6,500.

Required
a. Using the straight-line method, compute the depreciation expense for Year 1 and Year 2.
b. Assume the van was sold on January 1, Year 4, for $21,000. Determine the amount of gain or loss that would be recognized on the asset disposal.