Question

On October 1, 2021, Dew Company places a new asset into service. The cost of the asset is $80,000 with an estimated eight-year life and $8,000 salvage value at the end of its useful life. What is the depreciation expense for 2022 if Dew Company uses the straight-line method of depreciation

Answer 1

The depreciation expense for 2022 using the straight-line method for Dew Company's new asset is $9,000, calculated by subtracting the salvage value from the asset's cost and dividing by the asset's useful life.

Step-by-step explanation:

To calculate the depreciation expense for 2022 using the straight-line method, we first subtract the salvage value from the cost of the asset to determine the total depreciable amount. The cost of the asset is $80,000 and the salvage value is $8,000, so the depreciable amount is $80,000 - $8,000 = $72,000. We then divide this amount by the useful life of the asset, which is 8 years, to determine the annual depreciation expense: $72,000 ÷ 8 = $9,000.

Therefore, the depreciation expense for 2022 is $9,000. It's important to note that the first year's depreciation is for a partial year if the asset is placed in service at any time other than the beginning of the year, but since we are calculating for the full year of 2022, we use the full annual depreciation expense.