Question

•On April 1, 2006, Company A purchased an equipment at the cost of $140,000. This equipment is estimated to have 5 year useful life. At the end of the 5th year, the salvage value (residual value) will be 20,000. Company A recognizes depreciation to the nearest whole month. Calculate the depreciation expenses for 2006, 2007 and 2008 using straight line depreciation method.

Answer 1

Depreciation expense for :

2006 = $24,000

2007 = $24,000

2008 = $24,000

Step-by-step explanation:

Depreciation is a method that is used in expensing the cost of an asset .

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

($140,000 - $20,000) / 5 = $24,000

The straight line depreciation method allocates the same deprecation expense for each year of the useful life of the asset. So the depreciation expense each year would be the same.

I hope my answer helps you

Answer 2

Annual depreciation= $24,000

Step-by-step explanation:

Giving the following information:

Purchased equipment at the cost of $140,000. This equipment is estimated to have 5-year useful life. At the end of the 5th year, the salvage value (residual value) will be 20,000.

To calculate the annual depreciation, we need to use the following formula:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Under the straight-line method, depreciation is the same in all years.

Annual depreciation=(140,000 - 20,000)/5= $24,000