Answer to Question #141924 in Financial Math for anika sultana

Question

a company spends 150 to purchase equipment,if the useful life of this equipment is five years and we could allocated the usefulness of this equipment evenly over five years,at the end of the five years ,it will have a scrape value of 30.how much is the depreciation expense on the income statement?

Answer 1

$depreciation\ expense\ =\ depreciation\ rate\ *\ depreciable\ asset\ cost$

$depreciable\ asset\ cost\ =\ purchasing\ cost\ \ -\ salvage\ value$

$\ =\ 150\ -\ 30 = 120$

$\ depreciation\ rate\ =\ \frac{1}{5\ }\ *\ 100\ =\ 20 \% \ p.a$

$\ \frac{20}{100\ }\ *\ 120\ =\ 24$

$\ the\ depreciation\ expense\ is \ 24$