On October 1, 2022, Sunland Company places a new asset into service. The cost of the asset is $124000 with an estimated 5-year life and $22000 salvage value at the end of its useful life. What is the depreciation expense for 2022 if Sunland Company uses the straight-line method of depreciation

The depreciation expense is $5,100

Explanation:

The depreciation expense under the straight line method is computed as:

Depreciation expense = Asset Value - Salvage Value / Useful life of asset

where

Asset value is $124,000

Salvage Value is $22,000

Useful life of asset is 5 years

And asset is purchased on October, So depreciation will be computed from October to December, So, the number of months are 3

Depreciation expense = ($124,000 - $22,000) / 5 * 3 / 12

= $102,000 / 5 * 3 / 12

= $20,400 * 3 / 12

= $5,100