Question

Straight-Line Depreciation A building acquired at the beginning of the year at a cost of $125,800 has an estimated residual value of $4,800 and an estimated useful life of 10 years. Determine the following: (a) The depreciable cost $ (b) The straight-line rate % (c) The annual straight-line depreciation $

Answer 1

Answer:

a. Depreciable cost = $121000

b. The straight line rate = 10%

c. Annual depreciation = $12100

Explanation:

a.

The depreciable cost is the amount out of the total cost for an asset that is eligible for deprecaition. The deprecaible cost is the difference between the cost of an asset and its residual value.

Depreciable cost = $125800 - 4800 = $121000

b.

The straight line depreciation charges equal depreciation over an assets useful life. Let depreciable amount be considered as 100%

The straight line rate is = Depreciable amount in % / Useful life in years

Stright line rate  = 100% / 10 = 10%

c.

Annual straigh line depreciation = 121000 * 0.1 = 12100