Equipment acquired at the beginning of the year at a cost of $440,000 has an estimated residual value of $25,000 and an estimated useful life of 8 years. Determine (a) the depreciable cost, (b) the straight-line rate, and (c) the annual straight-line depreciation.
Answer:
a. $415,000 ($440,000 – $25,000)
b. 12.5% = (1/8)
c. $51,875 ($415,000 × 12.5%), or ($415,000 ÷ 8 years)