Question

# New Concept Company, a furniture wholesaler, acquired new equipment at a cost of \$380,000 on January...

New Concept Company, a furniture wholesaler, acquired new equipment at a cost of \$380,000 on January 1, 2017. The equipment has an estimated life of 4 years and an estimate salvage value of \$36,000.

Compute the depreciation for the equipment of use by the following method: Straight-line

 Ans. Depreciable cost = Cost of machine - Salvage value \$380,000 - \$36,000 \$344,000 Rate = 1 / Estimated life 1 / 4 = 0.25 *In straight line method the depreciation will be same every year. Year Depreciable cost (a) Rate (b) Annual Expense (a*b) Accumulated depreciation Net book value 1 \$344,000 0.25 \$86,000 \$86,000 \$294,000 2 \$344,000 0.25 \$86,000 \$172,000 \$208,000 3 \$344,000 0.25 \$86,000 \$258,000 \$122,000 4 \$344,000 0.25 \$86,000 \$344,000 \$36,000 *Accumulated depreciation = Sum of all previous and current year's depreciation *Net book value = Cost of asset - Current year's accumulated depreciation

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