CJ’s Pizza purchased a delivery van on January 1, 2005, for \($25,000\) . In addition, CJ’s paid sales tax and title fees of \($1,000\) for the van. The van is expected to have a four-year life and a salvage value of \($6,000\) .

Required:

a. Using the straight-line method, compute the depreciation expense for 2005 and 2006.

b. Assume the van was sold on January 1, 2008, for \($12,000\) . Determine the amount of gain or loss that would be recognized on the asset disposal.