Question

Sheridan Chemicals Company acquires a delivery truck at a cost of $27,200 on January 1, 2022. The truck is expected to have a salvage value of $4,300 at the end of its 5-year useful life. Compute annual depreciation for the first and second years using the straight-line method.

Answer 1

Answer:

$4,580 and $4,580

Explanation:

The depreciation expense computation for the first and second year under straight line method is as see below;

= Original cost - Residual value / Useful life

= ($27,200 - $4,300) / 5yrs

= $22,900 / 5yrs

= $4,580

With regards to using the straight line method, the depreciation value is the same for all the remaining useful years.

It therefore means that for the first and second year, the same depreciation value of $4,580 should be charged distinctly for each year.