The Cardiel Car Company Purchased a Passenger Van to Use

Multiple Choice

The Cardiel Car Company purchased a passenger van to use to transport customers when they leave their car for repairs. If the van is expected to last 7 years and costs $56,000, what effect would that have on income on the accrual basis each year?

A) The van's cost would need to be amortized/depreciated to recognize an expense equal to $10,000 each year.
B) Both the van and depreciation would be reduced by $8,000 each year.
C) No effect.
D) The van's cost would need to be amortized/depreciated to recognize an expense of $8,000 ($56,000 ÷ 7) in each year.