Answer:
Depreciation yr 2018= 6,640
Depreciation yr 2019= 6,640
Net loss= 21,000-23,920 = -2,920
Explanation:
Total acquisition cost= 36,000+1,200= 37,200
Depreciation per year= (Acquisition cost-salvage)/ useful life
=(37200-4000)/5
=6,640
Depreciation yr 2018= 6,640
Depreciation yr 2019= 6,640
Proceeds from sale of van= 21,000
Book value on Jan 1,2020 ; (BV)= (Acquisition cost- acc. depreciation)
BV= 37200-(6640+6640)= 23,920
Net loss= 21,000-23,920 = -2,920
The depreciation expense in 2018 and 2019 is $6640.
The loss that would be recognized on the sale of the asset is $-2920.
Depreciation is the process of expensing the cost of an asset. Depreciation occurs as a result of the wear and tear of using an equipment.
Straight line deprecation allocates the same depreciation expense for each of the useful life of the asset.
Straight line deprecation expense = (cost of the asset - salvage value) useful life
Cost of the asset = 36,000 + $1200 = $37,200
($37,200 - $4,000) / 5
= $33,200 / 5
= $6,640.
In order to determine the gain or loss on the sale of the taxi, the book value of the taxi as at 2020 has to be determined.
Book value = cost of the asset - accumulated depreciation
Accumulated depreciation = $6,640 x 2 = $13,280
Book value = $37,200 - $13,280
= $23,920
Loss on the sale = $21,000 - $23,920 = $-2920
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