Question

Give the formula to calculate Annual Depreciation as per ‘Straight Line Method?’​

Answer 1

Answer:

Depreciation per year =

Life period of Fixed Asset

Cost of Fixed Asset−Scrap Value

=

Estimated Life period of Fixed Asset

(Purchase Price+Installation charges)−Estimated Scrap Value

Explanation:

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Answer 2

Answer:

The straight line depreciation for the machine would be calculated as follows:

Cost of the asset: $100,000.

Cost of the asset – Estimated salvage value: $100,000 – $20,000 = $80,000 total depreciable cost.

Useful life of the asset: 5 years.

Divide step (2) by step (3): $80,000 / 5 years = $16,000 annual depreciation amount.