Question

Equipment acquired at the beginning of the year at a cost of $30,800 has an estimated residual value of $2,800 and an estimated useful life of four years. Determine the following: (a) The depreciable cost $fill in the blank 1 (b) The straight-line rate fill in the blank 2 % (c) The annual straight-line depreciation $fill in the blank 3

Answer 1

$28000

25%

$7000

Step-by-step explanation:

Depreciable cost = cost of the asset - residual value

$30,800 - $2800 = $28,000

The straight-line rate = annual depreciation expense / Depreciable cost

7000 / 28,000 x 100 = 25%

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

$28,000 / 4 = $7000