Question

oDouble Nickels Company purchased a computer system for $4,500 on January 1, 2013. The company expects to use the computer system for 3 years. It has no salvage value. Monthly depreciation expense on the asset is

Answer 1

Answer:

The answer is $125

Explanation:

Using straight line depreciation method, the formula is:

(Cost of the asset - salvage or residual value) ÷ number of useful life.

Cost of the asset = $4,500

Salvage or residual value -$0

Useful life = 3 years.

So depreciation expense =

$4,500 ÷ 3

=$1,500.

Mind you this is the annual depreciation expense and the question says Monthly depreciation.

Monthly depreciation is:

$1,500 ÷ 12 months

=$125