On October 1, 2017, Crane Company places a new asset into service. The cost of the asset is $103500 with an estimated 5-year life and $22500 salvage value at the end of its useful life. What is the depreciation expense for 2017 if Crane Company uses the straight-line method of depreciation?

Question

Business

Taniyah Campos

11 January, 10:14

On October 1, 2017, Crane Company places a new asset into service. The cost of the asset is $103500 with an estimated 5-year life and $22500 salvage value at the end of its useful life. What is the depreciation expense for 2017 if Crane Company uses the straight-line method of depreciation?

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Answers (1)

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Luca Hunt · Answer 1

The depreciation expense for 2017 is $4,050

Explanation:

The company uses straight-line depreciation method, Depreciation Expense per year is calculated by following formula:

Annual Depreciation Expense = (Cost of asset - Salvage Value) / Useful Life = ($103,500 - $22,500) / 5 = $16,200

Depreciation Expense per month = $16,200/12 = $1,350

Crane Company places a new asset into service on October 1, 2017. In 2017, the asset has been used for 3 months

The depreciation expense for 2017 = $1,350 x 3 = $4,050