Determining Financial Statement Effects of an Asset Acquisition and Depreciation (Straight-Line Depreciation) LO8-2, 8-3

Steves Outdoor Company purchased a new delivery van on January 1 for $48,000 plus $4,100 in sales tax. The company paid $13,100 cash on the van (including the sales tax), signing an 8 percent note for the $39,000 balance due in nine months (on September 30). On January 2, the company paid cash of $600 to have the company name and logo painted on the van. On September 30, the company paid the balance due on the van plus the interest. On December 31 (the end of the accounting period), Steves Outdoor recorded depreciation on the van using the straight-line method with an estimated useful life of 5 years and an estimated residual value of $4,800.

A. Compute the depreciation expense to be reported for Year 1.

Dep Expense _______

B. What would be the net book value of the van at the end of Year 2?

Net Book Value of van at end of Year 2
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Net book value at end of year 2