   Chapter 10, Problem 10.1BPE

Chapter
Section
Textbook Problem

Straight-line depreciationEquipment acquired at the beginning of the year at a cost of $340,000 has an estimated residual value of$45,000 and an estimated useful life of 10 years. Determine (a) the depreciable cost, (b) the straight-line rate, and (c) the annual straight-line depreciation.

(a)

To determine

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

Depreciation cost = (Cost of the assetResidual value)Estimated useful life of the asset

To determine: the depreciable cost of the equipment.

Explanation

Determinethe depreciable cost of the equipment.

Cost of the equipment= $340,000 Residual value of the equipment =$45,000.

DepreciableCost =Co

(b)

To determine
the straight-line rate.

(c)

To determine
the annual straight-line depreciation.

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