What is the first year depreciation using the straight line method in the follow

Question

What is the first year depreciation using the straight line method in the following example. Purchase price $1,250,000 Set up and install $55,000 Salvage value $118,000 Life expectency - seven years
84,786 101,666 128,653 169,571 What is the first year depreciation using the straight line method in the following example. Purchase price $1,250,000 Set up and install $55,000 Salvage value $118,000 Life expectency - seven years
84,786 101,666 128,653 169,571 What is the first year depreciation using the straight line method in the following example. Purchase price $1,250,000 Set up and install $55,000 Salvage value $118,000 Life expectency - seven years
84,786 101,666 128,653 169,571 What is the first year depreciation using the straight line method in the following example. Purchase price $1,250,000 Set up and install $55,000 Salvage value $118,000 Life expectency - seven years
84,786 101,666 128,653 169,571 84,786 101,666 128,653 169,571

Explanation / Answer

The formula for the straight line method for calculating depreciation is following

Straight line depreciation = (Cost of the Asset – Salvage Value) ÷ Estimated Useful Life

In the present case we have the following information

Purchase price = $1,250,000

Set up and install cost = $55,000

Salvage value = $118,000

Expected useful life = 7 years

Cost of the Asset = Purchase price + Set up and install cost

Cost of the Asset = $(1,250,000 + 55,000)

Cost of the Asset = $1,305,000

First year depreciation = ($1,305,000 – $118,000) ÷ 7

First year depreciation = $169,571

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