Question

Mittal Companies bought a machine at the beginning of the year at a cost of $27000. The estimated useful life was five years and the residual value was $2.500 Required: 1. Complete a depreciation schedule for the straight-line method.

Answer 1

$4,900 per year

Explanation:

I'm pretty sure you just do this:

It was worth $27,000 when they bought it.

After 5 years they'll be able to sell it for 2,500

So it will have lost a lot of its value. In fact, this much:

27,000 - 2,500 = $24,500

That's what the machine will have "cost" them over five years.

So to depreciate it using "the straight-line method," just divide that dollar amount by 5 years to find out how many dollars per year they get to write off as depreciation:

$24,500/5 yr = $4,900 per year