Question

A land grant university has upgraded its Course Management System (CMS), integrating the system throughout all of its main campus and branch campuses around the state. It has purchased a set of 15 servers and peripherals for needs associated with the CMS. The total cost basis is $120,000 and expected use will be 5 years, after which it will have no projected value. Calculate the depreciation deduction and book value for each year

Answer 1

The depreciation deduction and the book value each year using the straight line method is

Year                     Depreciation deduction       Book value

1                                 $24,000                                $96,000

2                               $24,000                                  $72,000

3                               $24,000                                  $48,000

4                             $24,000                                     $24,000

5                              $24,000                                     0

What is the depreciation expense?

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

120000 / 5 = $24,000

Depreciation expense each year would be $24,000

Book value = cost of the asset - accumulated depreciation

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