Question

Sargent Corporation bought equipment on January 1, 2021. The equipment cost $360,000 and had an expected salvage value of $60,000. The life of the equipment was estimated to be 6 years. The depreciation expense using the straight-line method of depreciation is

a. $70,000.
b. $72,000.
c. $50,000.
d. None of these answer choices are correct.

Answer 1

c. $50,000.

Step-by-step explanation:

Depreciation: The depreciation is a non-cash expense that shows a reduction in the value of the fixed assets due to tear and wear, obsolesce, usage, time period, etc. It is shown on the debit side of the income statement.

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

= (Original cost - expected salvage value) ÷ (estimated life of the equipment)

= ($360,000 - $60,000) ÷ (6 years)

= ($300,000) ÷ (6 years)

= $50,000

In this method, the depreciation is same for all the remaining useful life