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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

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Answer #1
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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