Marla's Pet Services may need to purchase a new industrial exercise machine for pets. The managerial accountant reported that the initial cost of the new asset is $200,000. The residual value is $35,000, and the useful life is 5 years. What is the annual depreciation expense using the straight-line depreciation method?

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Business

Kristin Hughes

30 October, 07:29

Marla's Pet Services may need to purchase a new industrial exercise machine for pets. The managerial accountant reported that the initial cost of the new asset is $200,000. The residual value is $35,000, and the useful life is 5 years. What is the annual depreciation expense using the straight-line depreciation method?

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Answers (1)

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Hadley Wood · Answer 1

=$33,000

Explanation:

Depreciation amount is the expense to be charged to the to profit and loss account every year. It calculated by first deducting the salvage value form the cost of the item.

For marla,

Depreciable amount is cost - residual value

=$200,000 - $ 35,000

=$165,000

The depreciation rate will be 1/5 x 100

=20 percent

The straight-line depreciation rate per year will be

=20/100 x 165,000

=0.2 x 165,000

=$33,000