Question

Henry Company purchased a depreciable asset for $240,000. The estimated salvage value is $22,000, and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset?

Answer 1

Depreciation base = $218,000

Step-by-step explanation:

Depreciation base of an asset is equal to the following:

Original Cost - Salvage Value

So, for the asset that Henry Company purchased, the calculation would be:

$240,000 - $22,000 = $218,000

This means that Henry Company would depreciate the $218,000 over the period the asset is used.

Answer 2

The depreciation base of the asset is $218,000.

Step-by-step explanation:

The depreciation base of an asset is the original cost of the asset minus its estimated salvage value. In this case, the asset was purchased for $240,000 and has an estimated salvage value of $22,000.

Therefore, the depreciation base is calculated as follows:

Depreciation Base = Cost of Asset - Salvage Value
Depreciation Base = $240,000 - $22,000
Depreciation Base = $218,000