Historic Pieces Inc. purchased equipment on January 1, 2012 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Assuming the company uses straight-line depreciation, what is the depreciation expense for 2012?

Question

Quizplus · Accepted Answer

The straight-line depreciation method calculates annual depreciation by subtracting the residual value from the cost and dividing by the useful life. ($275,000 - $25,000) / 5 years = $50,000 per year.