Question

The Adrift Sailing Company buys a fleet of 10 boats for $250 000. The company expects that boats will have a useful life of five years and the estimated residual value is £100 000. Therefore, using the straight-line depreciation method, the annual provision for depreciation is $ per year.

Answer 1

HEY

Step-by-step explanation:

To calculate the annual provision for depreciation using the straight-line method, we need to determine the depreciable amount of the fleet of boats and divide it by the useful life.

The depreciable amount is the initial cost minus the estimated residual value. In this case, it is $250,000 - $100,000 = $150,000.

Next, we divide the depreciable amount by the useful life of the boats, which is 5 years:

Depreciation per year = Depreciable amount / Useful life

Depreciation per year = $150,000 / 5

Depreciation per year = $30,000

Therefore, the annual provision for depreciation using the straight-line method is $30,000 per year.