A machine cost N12,000 and has a useful life of 4 years and an expected disposal value of N400. Using the straight line method, the annual depreciation is
A machine cost N12,000 and has a useful life of 4 years and an expected disposal value of N400. Using the straight line method, the annual depreciation is
Answer Details
To calculate the annual depreciation of the machine using the straight-line method, we need to subtract the expected disposal value from the original cost of the machine, and then divide the result by the useful life of the machine.
The calculation would be:
Annual depreciation = (Cost of machine - Expected disposal value) / Useful life of machine
Substituting the values given in the question, we get:
Annual depreciation = (N12,000 - N400) / 4 years
Annual depreciation = N11,600 / 4 years
Annual depreciation = N2,900 per year
Therefore, the annual depreciation using the straight-line method is N2,900.
This means that the value of the machine is expected to decrease by N2,900 each year over the 4-year useful life of the machine. At the end of the 4 years, the machine would have a net book value of N400, which is the expected disposal value.