1 Equipment is purchased which has an initial cost of 125000

1. Equipment is purchased which has an initial cost of $125,000. It has a 10-year life and its salvage value is estimated to be $12,000.

Determine the annual straight line accounting expense.

2. Equipment is purchased which has an initial cost of $125,000. It has a 10-year life and its salvage value is estimated to be $12,000.

Create a graph of book value vs. time.

Question 1

Initial cost = $125,000

Life = 10 years

Salvage value = $12,000

Calculate the annual straight line accounting expense -

Annual straight line accounting expense = [Initial cost - Salvage value]/Life

Annual straight line accounting expense = [$125,000 - $12,000]/10 = $113,000/10 = $11,300

The annual straight line accounting expense is $11,300.