Question

. Straight-line depreciation method: A unit of equipment is purchased for $100,000, which is expected to be used 2,000 hr/yr. The anticipated salvage value is $20,000 at the end of its 4-year useful life. Calculate the hourly depreciation costs using the straight-line depreciation method.

Answer 1

As per straight-line depreciation method:

Yearly Depreciation cost = (Asset cost – Salvage Value)/Estimated Useful Life

Given :

Asset cost= $100,000

Salvage value=$20,000

Estimated Useful Life= 4 years

Yearly Depreciation cost = (Asset cost – Salvage Value)/Estimated Useful Life

= ($100,000-$20,000)/4= 20,000

Yearly cost= $20,000

If it is expected to be used 2000 hr/yr then hourly cost= yearly cost/total used hours in an year= 20,000/2000= $10

hence the per hour depreciation cost is $10