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# 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 Preview

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 ...

#### Solution Summary

The solution explains how to calculate the straight line depreciation, book value and balance sheet presentation of fixed assets

\$2.49