Foster Company bought equipment on January 3 of this year for $10,000. At the time of purchase, the equipment was estimated to have a useful life of nine years and a trade-in value of $1,000 at the end of nine years. Using the straight-line method, the amount of one year's depreciation is

Question

Quizplus · Accepted Answer

Straight-line depreciation method allocates equal amounts of depreciation to each year of the asset's useful life. Thus, the amount of one year's depreciation is calculated as follows:

Cost of the equipment - Residual value
-------------------------------------
Useful life

= ($10,000 - $1,000) ÷ 9

= $1,000

Therefore, the correct answer is C.

Foster Company Bought Equipment on January 3 of This Year