If a sole trader purchases equipment for $5,000 and expects it to last 5 years with no salvage value, what is the annual depreciation using straight-line method?
Practice Questions
1 question
Q1
If a sole trader purchases equipment for $5,000 and expects it to last 5 years with no salvage value, what is the annual depreciation using straight-line method?
$1,000
$500
$2,500
$1,500
Annual depreciation using the straight-line method is calculated as Cost divided by Useful Life, which is $5,000 / 5 = $1,000.
Questions & Step-by-step Solutions
1 item
Q
Q: If a sole trader purchases equipment for $5,000 and expects it to last 5 years with no salvage value, what is the annual depreciation using straight-line method?
Solution: Annual depreciation using the straight-line method is calculated as Cost divided by Useful Life, which is $5,000 / 5 = $1,000.
Steps: 7
Step 1: Identify the total cost of the equipment. In this case, it is $5,000.
Step 2: Determine the useful life of the equipment. Here, it is 5 years.
Step 3: Understand that the straight-line method of depreciation means you will spread the cost evenly over the useful life.
Step 4: Use the formula for annual depreciation: Annual Depreciation = Cost / Useful Life.
Step 5: Plug in the numbers: Annual Depreciation = $5,000 / 5.
Step 6: Calculate the result: $5,000 divided by 5 equals $1,000.
Step 7: Conclude that the annual depreciation is $1,000.
