Question

Straight-Line Depreciation A refrigerator used by a wholesale warehouse has a cost of $64,000, an estimated residual value of $5,200, and an estimated useful life of 12 years. What is the amount of the annual depreciation computed by the straight-line method?

Answer 1

Answer:

$4,900

Explanation:

Cost of refrigerator = $64,000

Estimated residual value = $5,200

Useful life = 12 years

Using the straight line method,

Annual depreciation = ($64,000 - $5,200)/12

                                  = $58,800/12

                                  = $4,900

The difference between the cost and estimated residual value of the asset is the depreciation base of the asset over its useful life.