Question

Saul Company purchased a tractor at a cost of $180,000. The tractor has an estimated salvage value of $20,000 and an estimated life of 8 years, or 12,000 hours of operation. The tractor was purchased on January 1, 2019 and was used 2,400 hours in 2019 and 2,200 hours in 2020. What amount will Saul Company report as depreciation expense over the 8-year life of the equipment using straight-line depreciation

Answer 1

Annual depreciation= $20,000

Step-by-step explanation:

Giving the following information:

cost= $180,000.

The tractor has an estimated salvage value of $20,000 and an estimated life of 8 years

Under the straight-line depreciation method, the depreciation expense remains constant during the useful life. We need to use the following formula:

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

Annual depreciation= (180,000 - 20,000)/8

Annual depreciation= $20,000