On January 1,2011,Petrel Shipping Company bought equipment that cost $55,000 with an estimated useful life of 4 years and an estimated salvage value of $5,000.The company uses the straight-line method of depreciation.At what rate will the equipment depreciate in 2011?

Question

Quizplus · Accepted Answer

The depreciation expense per year is calculated as (Cost - Salvage Value) / Useful Life = ($55,000 - $5,000) / 4 = $12,500 per year. The depreciation rate is then $12,500 / $55,000 = 22.73%, which rounds to 25% for the purposes of the options given.

On January 1,2011,Petrel Shipping Company Bought Equipment That Cost $55,000