Question

In January 2009, Flooring Installation & Repair, Inc., purchased a van that cost $45,000. The firm estimated that the van would last for six years and have a salvage value of $3,000 at the end of 2014. The company uses the straight-line method of depreciation. Analyze each of the following independent scenarios:
a. Before the depreciation expense is recorded for the year 2012, the mechanic tells Flooring that the van can be used until the end of 2014 as planned, but that it will be worth only $750.
b. Before depreciation expense is recorded for the year 2012, Flooring decides that the van will last only until the end of 2013. The company anticipates the value of the van at that time will still be $1,500.
c. Before depreciation expense is recorded for the year 2012, Flooring decides that the van will last until the end of 2015, but that it will be worth nothing at that time.
d. Before the depreciation expense is recorded for the year 2012, the mechanic tells Flooring that the van can be used until the end of 2017 if the company spends $5,000 on a major overhaul. However, the estimated salvage value at that time (end of 2017) would be $100. Flooring decides to follow the mechanic’s advice and has the van overhauled.

Requirement
Calculate the amount of depreciation expense related to the van that Flooring Installation & Repair, Inc., would report on its income statement for the year ended December 31, 2012, for each scenario.



$1.99
Sales0
Views72
Comments0
  • CreatedSeptember 01, 2014
  • Files Included
Post your question
5000