Question

Jimmy's pizza bought a new pizza oven for $7,276. The useful life is estimated to be 12 years and the salvage value is $400. If jimmy uses straight line depreciation:

A. Calculate the annual depreciation
B. Determine the book value of the oven at the end of 8 years.

Answer 1

see below

Step-by-step explanation:

In straight-line depreciation, depreciation is a constant figure throughout the useful life of an asset.

The depreciation rate = 1/useful life x 100

For Jimmy's pizza depreciation rate

=1/12 x 100

=8.333%

The depreciable rate = Asset cost - salvage value

=$7,276 - $400

=$6,876

Annual depreciation = 8.333% x $6,876

=0.08333 x $6,876

=$573 per year

Book value after 8 years

=Asset value minus accumulated depreciation.

Accumulated depreciation = annual depreciation x number of year

Accumulated depreciation = $573 x 8

Accumulated depreciation= $4,584

Book value =$7,276 - $4,584

= $2,692