Question

NewTech purchases computer equipment for $264,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $28,000. rev: 07_27_2017_QC_CS-94103 Prepare a table showing depreciation and book value for each of the four years assuming straight-line depreciation.

Answer 1

Depreciation under Straight line method = (Cost - Salvage value) / Estimated useful life

= ($264,000 - $28,000) / 4

= $59,000

Year	Depreciation	Book value
1	$59,000	$205,000 ($264,000-$59,000)
2	$59,000	$146,000 ($264,000-$59,000-$59,000)
3	$59,000	$87,000 ($264,000-$59,000-$59,000-$59,000)
4	$59,000	$28,000 ($264,000-$59,000-$59,000-$59,000-$59,000)