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Computing Depreciation, Net Book Value, and Gain or Loss on Asset Sale Lynch Company owns and operates a delivery van that originally cost $46,400. Lynch has recorded straight-line depreciation on the van for four years, calculated assuming a $5,000 expected salvage value at the end of its estimated six-year useful life. Depreciation was last recorded at the end of the fourth year, at which time Lynch disposes of this van. a. Compute the net book value of the van on the disposal date.

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Answer:

The net book value of the van on the disposal date is $19,064

Explanation:

For computing the net book value, first, we have to compute the depreciation expense which is shown below:

The computation of the depreciation expense is shown below:

=  [tex]\frac{(orginal\ cost - salvage\ value)}{(useful\ life)}[/tex]

= [tex]\frac{(\$46,000 - \$5,000)}{(6\ years)}[/tex]

= $6,834

Now we have to compute the net book value which is presented below:

= Original cost - (yearly depreciation expense × number of years)

=  $46,400 - ($6,834 × 4)

= $46,400 - $27,336

= $19,064

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