A firm is considering purchasing an asset that will have a useful life of 15 years and cost $5 million; it will have installation costs of $500,000 and a salvage or residual value of $500,000.What is the annual straight-line depreciation for this asset?
A)$333,333 per year
B)$500,000 per year
C)$600,000 per year
D)$700,000 per year

Question

Quizplus · Accepted Answer

The annual straight-line depreciation is calculated by subtracting the salvage value from the cost (including installation costs) and then dividing by the useful life. Here, ($5,000,000 + $500,000 - $500,000) / 15 = $333,333 per year.

A Firm Is Considering Purchasing an Asset That Will Have