Question

The accounting rate of return requires the use of the accrual basis of accounting and​ therefore, the annual depreciation must be caluclated. How do you calculate the annual​ depreciation?

Answer 1

Annual depreciation is calculated by dividing the cost of an asset over its useful life.

Step-by-step explanation:

For example, if a company is looking to invest in new machinery which costs USD 300,000 and the machinery is expected to have a useful life of 10 years with no scap/salvage value, then the annual depreciation would be computed as:

USD 300,000/10 = USD 30,000 depreciation expense per year.