Question

On July 1, Goliath National Bank pays 50,000 for equipment. They estimate that the equipment has a useful life of 5 years. At the end of its life, the equipment can be sold for10,000. Compute the first-year depreciation expense using the straight-line method.

Answer 1

The first-year depreciation expense using the straight-line method for the equipment purchased by Goliath National Bank is $8,000.

Step-by-step explanation:

To calculate the first-year depreciation expense using the straight-line method, we need to find the difference between the initial cost of the equipment and its expected salvage value. In this case, the equipment was purchased for $50,000 and has a salvage value of $10,000. The depreciable base is calculated by subtracting the salvage value from the initial cost: $50,000 - $10,000 = $40,000.

Next, we divide the depreciable base by the useful life of the equipment to find the annual depreciation expense: $40,000 ÷ 5 years = $8,000.

Therefore, the first-year depreciation expense using the straight-line method is $8,000.