An organization purchased a piece of equipment for N112,000. It is expected to be used for 6 years then sold for N16,000. What is the annual amount of depre...

An organization purchased a piece of equipment for N112,000. It is expected to be used for 6 years then sold for N16,000. What is the annual amount of depreciation, if the straight-line method is used?

Answer Details

The straight-line method is a commonly used depreciation method that assumes that the asset loses the same amount of value each year over its useful life. To calculate the annual amount of depreciation using the straight-line method, we need to know the initial cost of the asset, its expected salvage value (the amount it is expected to be sold for at the end of its useful life), and its useful life. In this case, the initial cost of the equipment is N112,000, and its expected salvage value is N16,000. The useful life of the equipment is 6 years. To calculate the annual amount of depreciation, we subtract the salvage value from the initial cost and then divide by the useful life: Annual depreciation = (Initial cost - Salvage value) / Useful life Annual depreciation = (N112,000 - N16,000) / 6 Annual depreciation = N96,000 / 6 Annual depreciation = N16,000 Therefore, the correct answer is N16,000.