A company purchased an air conditioning system for $10200. The shipping charges on the system were $875, and the setup cost were $1250. The system is expected to last for five years and has a residual value of $2000. If you use the straight-line method to calculate the depreciation for this air conditioning system what would be the annual depreciation?

Question

A company purchased an air conditioning system for $10200.  The shipping charges on the system were $875, and the setup cost were $1250.  The system is expected to last for five years and has a residual value of $2000.  If you use the straight-line method to calculate the depreciation for this air conditioning system what would be the annual depreciation?

Damon · Answer

investment = 12325 residual = 2000 depreciate 10325 over 5 years SL 10325/5 = 2065 per year