Question

NewTech purchases computer equipment for $260,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $28,000. Prepare a table showing depreciation and book value for each of the four years assuming straight-line depreciation.  

Answer 1

Depreciation under Straight line method
	depreciation = (Cost of the asset - Salvage Value)/ Useful life of asset
	= ($260,000-$28,000 )/4
	=$232,000/4
	=$58,000 per year
Depreciation expense for the second year = $58,000
Year	Opening Carrying Amount	Depreciation Expense	Accumulated Depreciation	Book value
1	$2,60,000	$58,000	$58,000	$2,02,000
2	$2,02,000	$58,000	$1,16,000	$1,44,000
3	$1,44,000	$58,000	$1,74,000	$86,000
4	$86,000	$58,000	$2,32,000	$28,000