A depreciable asset was purchased for $8,000. The estimated useful life of the asset is 5 years. The estimated salvage value is $500. What is the amount of depreciation expense for each year under the straight line method?

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Business

Janae Mullins

12 November, 20:41

A depreciable asset was purchased for $8,000. The estimated useful life of the asset is 5 years. The estimated salvage value is $500. What is the amount of depreciation expense for each year under the straight line method?

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Answers (1)

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Micaela Martin · Answer 1

The estimated amount of depreciation expense is $1,500

Explanation:

Depreciation means a permanently and continuous diminution in value or quaof a tangible non-current asset. Depreciation occurs over several years. Every year a non-current asset is used, the price of that asset reduces drastically. There are various methods used to solve the rate of depreciation. There is the straight line method and reducing balance method. The question requires to be solved using the straight line method.

The formula for solving depreciation using a straight line method is; (Cost less Estimated scrap value) : Number of expected years of use.

Replacing with figures, we have: ($8,000 - $500) : 5 years = $1,500. Therefore, $1,500 is our estimated amount of depreciation expense.