Could some one please explian how to do this problem thanks :)
A company purchased an air conditioning system for $10,200. The shipping charges on the system were $875, and the set up cost were $1,250,The system is expected to last for five years and has a residual value of $2,000 Using the straight line method to calulate the depreciation for this ac system, what would be annual the depreciation
The annual straight-line depreciation amount would be (1/5) of (net cost - residual value)
= (1/5)(10,200 + 875 + 1250 - 2000)
= ?
thanks :)
To calculate the annual depreciation using the straight-line method, you need to determine the total depreciation over the useful life of the asset and then divide it by the number of years. Here's how you can do it step by step:
1. Calculate the total depreciation:
Total Depreciation = Cost of the asset - Residual value
In this case, the cost of the air conditioning system is $10,200, and the residual value is $2,000.
Total Depreciation = $10,200 - $2,000 = $8,200
2. Determine the annual depreciation:
Annual Depreciation = Total Depreciation / Useful life
The useful life of the air conditioning system is given as five years.
Annual Depreciation = $8,200 / 5 = $1,640
Therefore, the annual depreciation of the air conditioning system using the straight-line method would be $1,640.