Question

Disposal of Fixed Asset Equipment acquired on January 6 at a cost of $483,000, has an estimated useful life of 10 years and an estimated residual value of $63,000. a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?

Answer 1

Answer: $42,000

Explanation:

Using a straight line Depreciation method means that the Equipment will be depreciated uniformly throughout it's life.  i.e by the same amount.

Depreciation = (Cost - Residual Value) / Useful Life

= (483,000 - 63,000) / 10

= 420,000/10

= $42,000

The annual Depreciation amount for Year 1 - 3 is $42,000 and will be the same as long as the Equipment is in service.