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On October 1, 2021, Sunland Company places a new asset into service. The cost of the...

On October 1, 2021, Sunland Company places a new asset into service. The cost of the asset is $130000 with an estimated 5-year life and $29000 salvage value at the end of its useful life. What is the depreciation expense for 2021 if Sunland Company uses the straight-line method of depreciation?

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Answer #1

*Straight-line depreciation for 2021:$5,050.

Workings:

*Straight-line method of depreciation: Depreciable cost is the cost of the asset less its salvage value. we divide the depreciable cost by the asset’s useful life;

*Straight-line depreciation = Cost - Salvage value / No. of useful life;

*Straight-line depreciation = $130,000 - $29,000 / 5 years = $101,000 / 5 years;

*Straight-line depreciation = $20,200 per year.

*For October 1, 2021, to December 31, 2021. So, the number of months= 3 Months.

*Straight-line depreciation for 2021: [$20,200 * 3Months/12Months];

*Straight-line depreciation for 2021: $5,050.

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