Answer:
$4500
Explanation:
Given: Purchase cost of Van= $40000
Estimated useful life= 8 years
residual value= $4000
As given we have to use straight line method for finding depreciation expense;
Formula, Depreciation expense= [tex]\frac{\textrm{Cost of the asset - residual value}}{estimated useful life}[/tex]
Annual depreciation expense= [tex]\frac{40000 - 4000}{8} = \frac{36000}{8}[/tex]
∴ Depreciation expense= [tex]\$ 4500.[/tex]
We know that in straight line method of depreciation, depreciation expense will remain same for all useful life of asset, however, book value changes.
∴ Depreciation expense for second year will also be $4500.
