Question

Suppose that Petrobras assumes a zero salvage value for their "Equipment & other assets." For each...

Suppose that Petrobras assumes a zero salvage value for their "Equipment & other assets." For each $100 in new asset investments, what is the annual amount of depreciation expense charged to the income statement?

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Answer #1

Answer: Cost of the asset/Useful life of the asset

i.e., cost of asset divided by useful life of the asset

Explanation:

Suppose the Asset cost is $100 and useful life of the asset is 5 years. The simplest method to calculate depreciation is under straight line method. This is the method used by most of the companies for tax and sale purposes. Every year the depreciation expense will be the same.

i.e., $100/5 = $20 depreciation expense as per the mentioned example.

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