Question

MacGyver Company bought equipment on January 3, 2019, for $34,700. At the time of purchase, the equipment was estimated to have a useful life of 5 years and a salvage value of $1,220. Using the straight-line method, the amount of one year's depreciation is

Answer 1

The annual depreciation on the equipment using the straight-line method is $6,696, calculated by subtracting the salvage value from the cost and then dividing by the useful life.

Step-by-step explanation:

To calculate the annual depreciation using the straight-line method, you first determine the depreciable base, which is the cost of the equipment minus its salvage value. You then divide this amount by the useful life of the equipment to find the yearly depreciation.

Cost of equipment: $34,700
Salvage value: $1,220
Useful life: 5 years

Depreciable base = Cost of equipment - Salvage value
Depreciable base = $34,700 - $1,220
Depreciable base = $33,480

Annual depreciation = Depreciable base / Useful life
Annual depreciation = $33,480 / 5
Annual depreciation = $6,696

Answer 2

The amount of one year's depreciation is $6,696

Step-by-step explanation:

Depreciation expense is the difference between the cost of the asset and the residual value, divided by the useful life of the asset.

Depreciation expense=(original cost-residual cost) /useful life

Depreciation expense=($34,700-$1,220)/5

Depreciation expense=6.696