Oakland Company owns a fixed asset with an original cost of $100,000.The company estimates it will use the fixed asset for 5 years,at which time the fixed asset will be sold for $10,000.The annual depreciation expense is ________.
A)$0
B)$10,000
C)$18,000
D)$20,000

Question

Quizplus · Accepted Answer

The annual depreciation expense can be calculated using the straight-line method: 
Depreciation expense = (Original cost - Salvage value) / Useful life
= ($100,000 - $10,000) / 5 years
= $18,000 per year. Therefore, the correct choice is C. Option A is incorrect because there is depreciation over the useful life. Option B is incorrect as the asset is depreciated over the useful life, not its salvage value. Option D is incorrect as dividing the total cost by the useful life period would give the wrong answer.

Oakland Company Owns a Fixed Asset with an Original Cost