Question

In anticipation of Chester Corporation’s new product Chele, the company purchased new plant and equipment for $24,400,000. The plant and equipment is expected to be used for 15 years, and has a planned salvage value of $0. Assuming straight-line depreciation, how much will Chele expense in depreciation next year?

Answer 1

Answer:

Chele expense in depreciation next year will be $1,626,666.67

Explanation:

Chester Corporation uses the straight-line method of depreciation, Depreciation Expense each year is calculated by following formula:  

Annual Depreciation Expense = (Cost of the asset − Salvage Value )/Useful Life  

The asset (plant and equipment) have cost of $24,400,000 and salvage value of $0

The plant and equipment is expected to be used for 15 years.

Annual Depreciation Expense = ($24,400,000 - $0)/15 = $1,626,666.67

Chele expense in depreciation next year will be $1,626,666.67