On April 1, 2015, Ninja Ltd. purchased equipment for $120,000. The equipment was estimated to have a residual value of $15,000 and is being depreciated over ten years using the straight-line method. What should be the depreciation expense for this equipment for the year ended December 31, 2020?

Question

Quizplus · Accepted Answer

To calculate the annual depreciation expense using the straight-line method, we need to subtract the residual value from the original cost of the asset and then divide by the useful life.

Original cost - Residual value = Depreciable amount
$120,000 - $15,000 = $105,000

Depreciable amount / Useful life = Annual depreciation expense
$105,000 / 10 years = $10,500 per year

Therefore, the depreciation expense for the year ended December 31, 2020, would be $10,500.