Question

On November 1, 2016, Cullumber Company places a new asset into service. The cost of the asset is $78500 with an estimated 10-year life and $8500 salvage value at the end of its useful life. What is the depreciation expense for 2017 of Cullumber Company uses the straight-line method of depreciation? g

Answer 1

Answer:

$7,000

Explanation:

Depreciation: The depreciation is an expense that shows a reduction in the value of the fixed assets due to tear and wear, obsolesce, usage, time period, etc. It is shown on the debit side of the income statement. It is a non-cash item that does not affect the cash balance.  

The computation of the depreciation expense for 2017 is shown below:

= (Original cost - residual value) ÷ (useful life)

= ($78,500 - $8,500) ÷ (10 years)

= ($70,000) ÷ (10 years)  

= $7,000

In this method, the depreciation is same for all the remaining useful life