Question

On November 1, 2006, Dark Company places a new asset into service. The cost of the asset is $9,000 with an estimated 5-year life and $1,000 salvage value at the end of its useful life. What is the depreciation expense for 2007 if Dark Company uses the straight-line method of depreciation?a. $400b. $1,600c. $266.67d. $900

Answer 1

b. $1,600

Step-by-step explanation:

The depreciation expense under the straight-line method is shown below:

= (Original cost - residual value) ÷ estimated life in years

= ($9,000 - $1,000) ÷ 5 years

= $1,600

In the straight-line method, the depreciation expense would remain the same over its useful life i.e 5 years

The original cost is the purchase price of the new asset