Question

untastic operates on a calendar year. On January 1st, 2017, Funtastic Company placed a new asset into service. The cost of the asset was $50,000 with an estimated 5-year life and $10,000 salvage value. What is the depreciation expense for 2017 if Funtastic Company uses the straight-line method of depreciation

Answer 1

$8,000

Step-by-step explanation:

If untastic operates on a calendar in 2017, the asset was operational for a full year.

Depreciation for the asset will be

Asset cost - salvage value

=$50,000 -$10,000

=$40,000.... depreciable amount

The rate of depreciation = 1/5 years x 100

= 20%

Depreciation for 2017 will be = 20/100 x $40,000

= 0.2 x $40,000

=$8,000