Question

Required information Use the following information for the Exercises below. [The following information applies to the questions displayed below.] NewTech purchases computer equipment for $259,000 to use in operating activities for the next four years. It estimates the equipment's salvage value at $27,000. Exercise 8-7 Straight-line depreciation LO P1 Prepare a table showing depreciation and book value for each of the four years assuming straight-line depreciation.

Answer 1

Purchase price of equipment = $259,000

Salvage value = $27,000

Useful life = 4 years

Annual depreciation expense = (Purchase price of equipment-Purchase price of equipment)/Useful life

= (259,000-27,000)/4

= $58,000

Year	Book value Beginning of Year	Depreciation expense	Accumulated depreciation	Book value End of Year
1	259,000	58,000	58,000	201,000
2	201,000	58,000	116,000	143,000
3	143,000	58,000	174,000	85,000
4	85,000	58,000	232,000	27,000

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