Question

A local dry-cleaning company bought new equipment and its estimated useful life is 4 years. Using the straight-line depreciation method, what is the rate of depreciation each year?

Answer 1

$2,500 or 25%

Explanation:

Let's use the same example:

Cost of Equipment = $10,000

Useful Life = 4 years

Depreciation Rate = (Annual Depreciation / Cost of Equipment) * 100

Annual Depreciation = Cost of Equipment / Useful Life

Annual Depreciation = $10,000 / 4 years

Annual Depreciation = $2,500

Depreciation Rate = ($2,500 / $10,000) * 100

Depreciation Rate = 0.25 * 100

Depreciation Rate = 25%