A machine costing $145,800 is purchased on May 1, 2013. The machine is expected to be obsolete...
Question:
A machine costing $145,800 is purchased on May 1, 2013. The machine is expected to be obsolete after three years (36 months) and, thereafter, no longer useful to the company. The estimated salvage value is $5,400. Compute depreciation expense for both 2013 and 2014 using the straight-line method.
Straight-line Method
The straight-line method is one of the most commonly used depreciation methods. In this method, depreciation is allowed uniformly during the life of the asset. The depreciation is allowed on the depreciable cost of the asset. The depreciable cost is the difference between the acquisition cost and the salvage cost.
Answer and Explanation: 1
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{eq}Annual\ Depreciation = \dfrac{(Cost - Salvage\ value)}{Useful life} {/eq}
Here,
- Cost = $145,800
- Salvage value = $5,400
- Useful life = 3 years
...
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Straight-Line Depreciation: Method, Formula & Example
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Straight-line depreciation is a method used to calculate the decline in value of fixed assets, such as vehicles or office equipment. Learn how and when to use this formula.
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