A firm is considering purchasing two assets. Asset L will have a useful life of 15 years and cost $4 million; it will have installation costs of $750,000 but no salvage or residual value. Asset S will have a useful life of 5 years and cost $2 million; it will have installation costs of $500,000 and a salvage or residual value of $400,000. Which asset will have a greater annual straightminusline depreciation?

D. Asset S has $103,333 more in depreciation per year.

Explanation:

For computing the greater annual straight minus line depreciation first we have to determine the each assets depreciation expense which is shown below:

For Asset L

= (Original cost + installation cost - salvage value) : (useful life)

= ($4,000,000 million + $750,000 - $0) : (15 years)

= $316,666.67

For Asset S

= (Original cost + installation cost - salvage value) : (useful life)

= ($2,000,000 million + $500,000 - $400,000) : (5 years)

= $420,000

As we can see that the Asset S has high annual straight-line depreciation

And, the amount exceed is $103,333.33