Question

Johnson Certified bought a fiber optic cable for $975,000. The estimated life of the cable is 20 years, after which its salvage value is estimated to be $5,000. Using the straight-line method, what is the annual depreciation to the nearest cent?

Answer 1

Remember that straight line depreciation can be calculated using the formula:
$D_{a}= \frac{C-R}{U}$
where
$D_{a}$ is the annual depreciation 
$C$ is cost
$R$ is the salvage value 
$U$ is the estimated life in years.

For our problem we know that $C=975000$, $R=5000$, and $U=5000$. Lets replace those values in our formula to find $D_{a}$:
$D_{a}= \frac{975000-5000}{20}$
$D_{a}= \frac{970000}{20}$
$D_{a}=48500$

We can conclude that the annual depreciation of the optic fiber cable is $45,000