Question

Office equipment worth $16,000 is purchased and it is estimated that its useful life will be 4 years before it must be replaced by more modern equipment. Its scrap value is estimated at $2,500. Determine the annual depreciation using the straight line method.

Answer 1

First, we need to calculate the depreciable cost of the office equipment, which is the original cost minus the scrap value:

Depreciable cost = $16,000 - $2,500 = $13,500

Next, we need to determine the annual depreciation by dividing the depreciable cost by the useful life of the equipment:

Annual depreciation = Depreciable cost / Useful life
Annual depreciation = $13,500 / 4 years
Annual depreciation = $3,375

Therefore, the annual depreciation using the straight line method for the office equipment is $3,375.