Question

On January​ 1, 2018,​ Jordan, Inc. acquired a machine for $ 1 comma 040 comma 000. The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be $ 55 comma 000. Calculate the depreciation expense per year using the straightminusline method.

Answer 1

$197,000

Step-by-step explanation:

Depreciation is the systematic allocation of the cost of an asset to the income statement over the estimated useful life of that asset.

It is determined as the depreciable value of the asset over the estimated useful life of the asset where the depreciable value is the difference between the cost and salvage value of the asset

Mathematically, using the straight line method , the annual depreciation

= (cost - salvage value)/estimated useful life

= ($1,040,000 - $55,000)/5

= $197,000

Answer 2

Annual depreciation= $197,000

Step-by-step explanation:

Giving the following information:

Purchasing price= $1,040,000

Residual value= $55,000

Useful life in years= 5

Under the straight-line method, the annual depreciation is the same during the useful life of the machine. To calculate the annual depreciation, we need to use the following formula:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (1,040,000 - 55,000)/5= $197,000