Machinery acquired new on January 1 at a cost of $80,000 was estimated to have a useful life of 10 years and a residual salvage value of $20,000. Straight-line depreciation was used. The depreciation expense for the seventh year of use would be in value of:
$2,000
$8,000
$42,000
$6,000
| Year | book value (at the beginning of year) | Depreciation | book value (at the end of year) |
| 1 | $80,000 | $6,000 | $74,000 |
| 2 | $74,000 | $6,000 | $68,000 |
| 3 | $6,8000 | $6,000 | $62,000 |
| 4 | $62,000 | $6,000 | $56,000 |
| 5 | $56,000 | $6,000 | $50,000 |
| 6 | $50,000 | $6,000 | $44,000 |
| 7 | $44,000 | $6,000 | $38,000 |
| 8 | $38,000 | $6,000 | $32,000 |
| 9 | $32,000 | $6,000 | $26,000 |
| 10 | $26,000 | $6,000 | $20,000 |
Straight line depreciation
= cost of asset - salvage value/useful life.
Depreciation per year = $80,000 - $20,000/10
= $6,000 per year
Depreciation for seventh year is = $6,000.
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