In a case study, a company uses the straight-line method for a machine with a cost of $10,000, a salvage value of $1,000, and a useful life of 5 years. What is the annual depreciation expense?
Practice Questions
1 question
Q1
In a case study, a company uses the straight-line method for a machine with a cost of $10,000, a salvage value of $1,000, and a useful life of 5 years. What is the annual depreciation expense?
$1,800
$2,000
$1,500
$1,200
Annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life = ($10,000 - $1,000) / 5 = $1,800.
Questions & Step-by-step Solutions
1 item
Q
Q: In a case study, a company uses the straight-line method for a machine with a cost of $10,000, a salvage value of $1,000, and a useful life of 5 years. What is the annual depreciation expense?
Solution: Annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life = ($10,000 - $1,000) / 5 = $1,800.
Steps: 5
Step 1: Identify the cost of the machine, which is $10,000.
Step 2: Identify the salvage value of the machine, which is $1,000.
Step 3: Identify the useful life of the machine, which is 5 years.
Step 4: Calculate the total depreciation by subtracting the salvage value from the cost: $10,000 - $1,000 = $9,000.
Step 5: Divide the total depreciation by the useful life to find the annual depreciation expense: $9,000 / 5 = $1,800.
