Business High School

On January 1, Enco Co. purchases a milling machine for $15,000. The machine is expected to last seven years and have a salvage value of $1,000. Assuming the company uses the straight-line method, depreciation expense should be $_____ per year.The straight-line method is a time-based depreciation method that is the most popular because it is relatively easy to use. The depreciation expense each year will be the same.

Answers

Answer 1

On January 1, Enco Co. purchases a milling machine for $15,000. The machine is expected to last seven years and have a salvage value of $1,000. Assuming the company uses the straight-line method, depreciation expense should be $ 2000 per year.

Depreciation is a non-cash expense that represents decreases in the value of fixed assets as a result of usage, time, consumption, obsolescence, wear and tear, etc. It is displayed on the income statement's debit side.

The formula used to calculate depreciation

The cost using the straight line method is depicted as follows: = (Original Milling Machine Cost -

(Recovery value) + (expected useful life)

= ($15,000 - $2,000) ÷ (7 years)

= ($14,000) ÷ (7 years)

= $2,000

This approach uses the same depreciation rate for the entire remaining useful life.

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