Question

A piece of equipment costs $20,000 and has a residual (salvage value) of zero. It has a life of 5 years. The company uses the straight-line method.

A.) What is the Depreciation Expense for year 1?
What is the Depreciation Expense for year 2?
What is Accumulated Depreciation at the end of year 2?

Answer 1

Annual Depreciation under straight line method= cost of equipment- salvage value / No of. useful life of euipment

= 20,000-0 /5

= $ 4,000 annualy

A. Depreciation expense for year 1 =  $ 4,000

B.

Depreciation expense for year 2 =  $ 4,000

Accumulated depreciation at the end of year 2 will be = Annual Depreciation *No. of years put to use

= $ 4,000 *2 yrs

= $ 8000

Note -

Accumulated depreciation is the sum of total depreciation attributed to an asset since the asset was put to use.

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