Maxine,Inc.bought a machine on January 1,2012 for $48,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Maxine show on its income statement for the year ended December 31,2012?

Question

Quizplus · Accepted Answer

To calculate the annual depreciation expense, we use the straight-line depreciation method:
Depreciation expense per year = (Cost of the asset - Salvage value) / Useful life
Salvage value is the expected value of the asset at the end of its useful life. In this case, it is zero because the machine will be worthless. So:
Depreciation expense per year = ($48,000 - $0) / 8 = $6,000
Therefore, Maxine will show a depreciation expense of $6,000 on its income statement for the year ended December 31, 2012.