Final answer:
To calculate the annual depreciation expense for equipment using the straight-line method, subtract the estimated residual value from the cost, and divide that number by the useful life. In this case, the equipment with a cost of $930,200 and a residual value of $92,200 with a 20-year life will have an annual depreciation expense of $41,900.
Step-by-step explanation:
The subject of the question concerns accounting, specifically the calculation of depreciation expense for a piece of equipment. Here we are dealing with the straight-line depreciation method, which is a common accounting approach used to allocate the cost of an asset, minus its estimated residual value, evenly over its useful life.
To calculate the annual depreciation expense using the straight-line method, we use the following formula:
- Determine the depreciable base by subtracting the residual value from the cost of the equipment.
- Divide the depreciable base by the estimated useful life of the asset.
For the given equipment with a cost of $930,200 and an estimated residual value of $92,200, over an estimated useful life of 20 years, the annual depreciation expense would be calculated as follows:
Depreciable Base = Cost - Residual Value = $930,200 - $92,200 = $838,000
Annual Depreciation Expense = Depreciable Base / Useful Life = $838,000 / 20 years = $41,900 per year