Exercise $8-11$A $($Algo$)$ Events related to the acquisition, use, and disposal of a tangible plant asset:

Straight$-$line depreciation LO $8-2,8-5$

City Taxi Service purchased a new auto to use as a taxi on January $1,$ Year $1,$ for $$24,400.$ In addition, City paid sales tax and title fees of

$$990$ for the vehicle. The taxi is expected to have a five$-$year life and a salvage value of $$6,520.$

Required:

a$.$ Using the straight$-$line method, compute the depreciation expense for Year $1$ and Year $2.$

Note: Round your answers to the nearest whole dollar amount.

b$.$ Assume the auto was sold on January $1,$ Year $3,$ for $$20,518.$ Determine the amount of gain or loss that would be recognized on the

asset disposal.

Note: Round the intermediate calculations to nearest whole dollar amount.