Question

Here’s a short problem that illustrates how depreciation expense might change in the data case problem. Let’s say that a company buys $200,000 in fixed assets at the beginning of year one, an additional $25,000 at the beginning of year two, and $5,000 at the beginning of year three. Assume all of these assets have a life expectancy of five years, the company uses straight-line depreciation, and there is no salvage value for any of the fixed assets. What are the total amounts of depreciation expense for each of years one, two, and three?

Answer 1

43 Purchase 200000 25000 SODO depreciation 3 By straight line defore Wation, annual expense - cost - salvage value years (life expectancy) S Sawage value =0 for all 3 purchases. 5 Annual depreciation.

8 Asset r 200ooo- o = 40000 10 Asset 2= 250000 Sooo Asset 3 = 50000 1000 2 . 4 dep charges = 40000 Conly asset 1) Y dep changes - dep of asset I & dep of asset 2 = 4oooo + 5000 И Sooo Y dep charges - dep of asset (+ dep of asset 2 + dep of asset? = 40000 5000 + 10ool - ubooo