Find the annual amount of depreciation using the straight-line method. Round to the nearest dollar.
-Cost: $37,000
Estimated life: 25 years
Estimated scrap value: None

Question

Quizplus · Accepted Answer

The formula for straight-line depreciation is:

Depreciation = (Cost - Scrap Value) / Estimated Life

In this case, the scrap value is given as none, so we can ignore that part of the formula.

Depreciation = Cost / Estimated Life
Depreciation = $37,000 / 25 years
Depreciation = $1,480 per year

Round to the nearest dollar:
Depreciation = $1,480

Therefore, the best choice is B, $1,480. To calculate annual depreciation using straight-line method, we subtract the estimated scrap value (which is none in this case) from the cost, and then divide by the estimated life in years. 
($37,000 - $0) / 25 years = $1,480. Therefore, the annual amount of depreciation is $1,480, rounded to the nearest dollar, which is answer choice B.

Find the Annual Amount of Depreciation Using the Straight-Line Method