Question

Holmdene Enterprises purchased equipment for $60,000 on January 1, 2019. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the straight-line depreciation method, what would Holmdene record for 2019 depreciation expense (Year 1)

Answer 1

Holmdene will record a depreciation expense of $11000 in 2019

Step-by-step explanation:

The straight line method of depreciation charges a constant depreciation on the asset every year through out the estimated useful life of the asset. The depreciation expense per year under this method is calculated as follows,

Depreciation Expense per year = (Cost - Residual Value) / Estimated useful life

Depreciation expense per year = (60000 - 5000) / 5 = $11000 per year