E3-30A. Account for depreciation expense. (LO 1, 3). Maximus Dog Company purchased a new

supply van on January 1, 2011, for $35,000. The van is estimated to last for five years and will
then be sold, at which time it should be worth approximately $5,000. The company uses straight-
line depreciation and has a fiscal year end of December 31.
1. How much depreciation expense will be shown on the income statement for the year ended
December 31, 2011?
2. What is the book value (also called carrying value) of the van on the balance sheet for each five years beginning with December 31, 2011?

To account for depreciation expense, we need to calculate the annual depreciation amount using the straight-line depreciation method.

1. How much depreciation expense will be shown on the income statement for the year ended December 31, 2011?
The straight-line depreciation method divides the total depreciable cost of the asset evenly over its useful life.

To calculate the annual depreciation expense, we need to determine the depreciable cost. The depreciable cost is the original cost of the asset minus the estimated salvage value.

Depreciable Cost = Original Cost - Salvage Value
Depreciable Cost = $35,000 - $5,000
Depreciable Cost = $30,000

Next, we divide the depreciable cost by the useful life of the asset to get the annual depreciation expense.

Annual Depreciation Expense = Depreciable Cost / Useful Life
Annual Depreciation Expense = $30,000 / 5
Annual Depreciation Expense = $6,000

Therefore, the depreciation expense shown on the income statement for the year ended December 31, 2011, will be $6,000.

2. What is the book value (also called carrying value) of the van on the balance sheet for each five years beginning with December 31, 2011?
The book value of an asset is its original cost minus the accumulated depreciation. Since the van is depreciated evenly over five years, we can calculate the accumulated depreciation for each year and subtract it from the original cost to determine the book value.

Year 2011:
Book Value = Original Cost - Accumulated Depreciation
Book Value = $35,000 - $6,000
Book Value = $29,000

Year 2012:
Book Value = Original Cost - Accumulated Depreciation
Book Value = $35,000 - (2 * $6,000)
Book Value = $23,000

Year 2013:
Book Value = Original Cost - Accumulated Depreciation
Book Value = $35,000 - (3 * $6,000)
Book Value = $17,000

Year 2014:
Book Value = Original Cost - Accumulated Depreciation
Book Value = $35,000 - (4 * $6,000)
Book Value = $11,000

Year 2015:
Book Value = Original Cost - Accumulated Depreciation
Book Value = $35,000 - (5 * $6,000)
Book Value = $5,000

Therefore, the book value (carrying value) of the van on the balance sheet for each five years beginning with December 31, 2011, will be $29,000, $23,000, $17,000, $11,000, and $5,000, respectively.