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Depreciation by Straight Line Method

1 have trouble figuring out theses two problems dealing with depreciated by straight line method.

1) Equipment cost of $120,000 has a estimated residual value of $10,000 and a estimated life of 5yrs or 12,000hrs. It is to be depreciated by the straight line method. What is the amount of depreciation for the first full year during which the equipment was used 3,000 hours?

2)Equipment cost of $50,000 has a estimated residual value of $8,000 and a estimated life of 12yrs was depreciated by the straight line method for 5yrs. Due to obsolescence, it was determined that the useful life should be shortened by 5yrs and residule value canged to zero. The depreciation expense for the current and future years is?

Solution Preview

1. Under straight line method, depreciation is calculated as (Cost - Salvage Value)/Useful life. It is given that cost = 120,000, salvage value = 10,000 and useful life is 5 years
Straight line depreciation = (120,000-10,000)/5 = 110,000/5 = $22,000 per year.
The depreciation amount will be ...

Solution Summary

The solution explains the process of calculating the depreciation for an equipment. It also explains how to recalculate the depreciation of the initial estimate is changed

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