The Hanna Company uses straight-line depreciation and is considering a capital expenditure for which the following relevant cash flow data have been estimated: The total depreciation expense over the life of the asset is

Question

The Hanna Company uses straight-line depreciation and is considering a capital expenditure for which the following relevant cash flow data have been estimated:  The total depreciation expense over the life of the asset is

Quizplus · Accepted Answer

Since the Hanna Company uses straight-line depreciation, the depreciation expense per year can be calculated as $1,000,000/10 = $100,000 per year. Multiplied by the useful life of the asset (which is 4.5 years), the total depreciation expense over the life of the asset would be $100,000 × 4.5 = $450,000. Therefore, the correct answer is C.

The Hanna Company Uses Straight-Line Depreciation and Is Considering a Capital