Question

The company can use the straight-line depreciation method to depreciate the plant and equipment over its useful life of 6 years. The annual depreciation expense would be ______.

Answer 1

The annual depreciation expense is calculated by subtracting the salvage value from the cost of the asset and dividing by its useful life of 6 years, but the asset's cost and salvage value are needed for an exact figure.

Step-by-step explanation:

To calculate the annual depreciation expense using the straight-line depreciation method, you first need to know the cost of the plant and equipment and if there's any salvage value expected at the end of its useful life. The formula for straight-line depreciation is:

(Cost - Salvage Value) / Useful Life

However, the question does not provide the cost of the plant and equipment or its salvage value. Assuming those are known, you would subtract the salvage value from the cost to determine the depreciable base, then divide that number by the useful life of 6 years to find the annual depreciation expense.

For example, if the plant and equipment cost $360,000 and had no salvage value, the annual depreciation expense would be $360,000 divided by 6, which equals $60,000 per year.