Historic Pieces Inc. purchased equipment on January 1, 2021 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Assuming the company uses straight-line depreciation, what is the depreciation expense for 2021?

Question

Quizplus · Accepted Answer

The depreciation expense using the straight-line method is calculated by subtracting the residual value from the cost of the asset and then dividing by the useful life. So, ($275,000 - $25,000) / 5 = $50,000 per year.