Question

Computer equipment was acquired at the beginning of the year at a cost of $66,600 that has an estimated residual value of $4,100 and an estimated useful life of five years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

Answer 1

Depreciable cost = Cost of equipment - residual value

Depreciable cost = 66,600 - 4,400

= $2,200

Annual depreciation = cost - residual value / useful life

Annual depreciation = 66,600 - 4,400 / 5

= 12,440

Straight-line rate = Annual depreciation expense / cost - residual value

Straight-line rate = 12,400 / 66,600 - 4,400

= 0.199