Foster Company bought equipment on January 3 of this year for $10,000. At the time of...
Foster Company bought equipment on January 3 of this year for $10,000. At the time of purchase, the equipment was estimated to have a useful life of nine years and a trade-in value of $1,000 at the end of nine years. Using the straight-line method, the amount of one year's depreciation is
Select one:
a. $1,111.
b. $1,222.
c. $1,000.
d. $9,000.
e. $2,000.
Homework Answers
Answer is $1,000
Cost of Equipment = $10,000
Salvage Value = $1,000
Useful Life = 9 years
Depreciable Cost = Cost of Equipment - Salvage Value
Depreciable Cost = $10,000 - $1,000
Depreciable Cost = $9,000
Annual Depreciation = Depreciable Cost / Useful Life
Annual Depreciation = $9,000 / 9
Annual Depreciation = $1,000
Therefore, the amount of one year’s depreciation is $1,000
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