Question

On November 1, 2016, Love Company places a new asset into service. The cost of the asset is $90,000 with an estimated 5-year life and $10,000 salvage value at the end of its useful life. What is the depreciation expense for 2017 if Love Company uses the straight-line method of depreciation?

Answer 1

$16,000

Step-by-step explanation:

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

= (Original cost - residual value) ÷ (useful life)

= ($90,000 - $10,000) ÷ (5 years)

= ($80,000) ÷ ( 5 years)

= $16,000

We simply deduct the salvage value from the original cost and then divide it by its useful life. So, that the depreciation expense would come for the particular year