A company purchased a plant asset for $60,000. The asset has an estimated salvage value of $4,000, and an estimated useful life of 7 years. The annual depreciation expense using the straight-line method is $4,000 per year.
Depreciation Expense = (Cost - Salvage Value)/Estimated Useful Life
Depreciation Expense = ($60,000 - $4,000)/7; Depreciation Expense = $8,000

Question

Quizplus · Accepted Answer

The correct annual depreciation expense is $8,000, not $4,000, as calculated using the straight-line method formula.

A Company Purchased a Plant Asset for $60,000