Question

On July 1, 2022, Lavaux Inc. purchased a machine for ( $ 25,000) and placed it in service. The machine has an estimated salvage value of ($ 3,000 ) and a useful life of 8 years. Compute depreciation expense for the machine purchased by Lavaux Inc., you can use the straight-line depreciation method.

Answer 1

The annual depreciation expense for the machine purchased by Lavaux Inc. using the straight-line method is $2,750, calculated by subtracting the salvage value from the cost of the machine and dividing by the machine's useful life.

Step-by-step explanation:

To calculate the depreciation expense for the machine purchased by Lavaux Inc. using the straight-line depreciation method, we would use the following formula:

Depreciation Expense = (Cost of the asset - Salvage value) / Useful life of the asset

In this scenario, the cost of the asset is $25,000, the salvage value is $3,000, and the useful life is 8 years.

Depreciation Expense = ($25,000 - $3,000) / 8

Depreciation Expense = $22,000 / 8

Depreciation Expense = $2,750 per year

This is the annual expense Lavaux Inc. would report for the use of the machine.