Question

On January 1, 2017 Smart Touch Learning purchased equipment for $ 20,000 with an estimated useful life of 5 years and a residual value of $ 4,000. Under the straight-line depreciation method, what is the annual depreciation expense for the equipment?

Answer 1

The annual depreciation expense for Smart Touch Learning's equipment, under the straight-line method, is $3,200, calculated by subtracting the residual value from the purchase price and dividing by the useful life.

Step-by-step explanation:

To calculate the annual depreciation expense for equipment using the straight-line depreciation method, we need to subtract the residual value from the purchase price and then divide that amount by the estimated useful life of the equipment.

The formula for straight-line depreciation is:

Annual Depreciation Expense = (Purchase Price - Residual Value) / Useful Life

In this case:

• Purchase Price = $20,000
• Residual Value = $4,000
• Useful Life = 5 years

Applying these values to the formula gives us:

Annual Depreciation Expense = ($20,000 - $4,000) / 5 = $3,200

So, the annual depreciation expense for Smart Touch Learning for their equipment is $3,200.