Question

At the beginning of Year 1, Copeland Drugstore purchased a new computer system for $52,000. It is expected to have a five-year life and a $7,000 salvage value.

Compute the depreciation for each of the five years, assuming that the company uses

Straight-line depreciation.

Answer 1

Using the straight-line depreciation method, the annual depreciation for Copeland Drugstore's new computer system is $9,000 for each of the five years, calculated by subtracting the salvage value from the purchase price and dividing by the useful life.

Step-by-step explanation:

To calculate the depreciation of a computer system with the straight-line depreciation method, you must first compute the total amount to be depreciated by subtracting the salvage value from the purchase price. In the given situation, the computer system was purchased for $52,000 and is expected to have a $7,000 salvage value after five years. Therefore, the total depreciable amount is $52,000 - $7,000 = $45,000. This amount will be spread evenly over the asset's useful life, which is five years.

The annual depreciation expense is calculated by dividing the depreciable amount by the number of years in the asset's useful life:

Annual depreciation expense = Total depreciable amount / Asset's useful life.

Annual depreciation expense = $45,000 / 5 = $9,000 per year.

Therefore, the depreciation expense for each of the five years will be $9,000.