Straight line depreciation
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Monumental Products Corp. had recently purchased a new machinery at a cost of $450,000. Management estimates that the equipment will have a useful life of 15 years and no salvage value at the end of the period.
If the straight-line depreciation method is used for financial reporting, calculate the following:
A) Annual depreciation expense.
B) Accumulated depreciation at the end of years 1 through 5.
C) If this was the company's only fixed asset, what would the Balance Sheet account, Fixed Assets (net) show at the end of years 1 and 5?
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Solution Summary
The solution explains how to calculate the straight line depreciation, book value and balance sheet presentation of fixed assets
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A) Annual depreciation expense.
Under straight line method, the annual depreciation is calculated as (Cost - Salvage Value)/useful life
In this question
Cost = 450,000
Salvage Value = 0
Useful Life = 15 years
Annual Depreciation = 450,000/15 = $30,000
The annual depreciation expense is $30,000
B) Accumulated depreciation at the end of years 1 through 5.
In the straight line method, the depreciation is constant in each year. The ...
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