   Chapter 5A, Problem 1SEB

Chapter
Section
Textbook Problem

STRAIGHT-LINE DEPRECIATION A computer was purchased on January 1 at a cost of $5,000. It has an estimated useful life of five years and an estimated salvage value of$500. Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the straight-line method.

To determine

Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the straight-line method.

Explanation

Depreciation:

Depreciation is a method of reducing the capitalized cost of long-lived operating assets or plant assets for the period the asset is used.

Straight-line depreciation method:

The depreciation method which assumes that the consumption of economic benefits of long-term asset could be distributed equally throughout the useful life of the asset is referred to as straight-line method.

Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the straight-line method.

(Figure 1)

Excel working:

(Figure 2)

Working notes:

(1) Calculate the depreciable cost:

Depreciable cost = Original costSalvage value=$5,000$500=\$4

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