To compute amortization expense using the straight-line formula,the cost of a depreciable asset (i.e.,equipment)must be reduced by any estimated residual or salvage value.

Question

Quizplus · Accepted Answer

This statement is true. To compute amortization expense using the straight-line formula, the cost of a depreciable asset must be reduced by any estimated residual or salvage value. The residual or salvage value is the estimated value of the asset at the end of its useful life, and it represents the amount that the company expects to receive from selling or disposing of the asset. By subtracting this value from the cost of the asset, the company can determine the amount of depreciation or amortization expense that will be recorded each year over the asset's useful life.

To Compute Amortization Expense Using the Straight-Line Formula,the Cost of a Depreciable