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DLW, Inc just started its business. DLW purchased factory equipment for $800,000 on January 1. It is estimated that the equipment will have a $30,000 salvage value at the end of its estimated 10-year useful life. If the company uses the straight-line method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be:

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Answer:

Annual depreciation= $77,000

Explanation:

Giving the following information:

Purchase price= $800,000

Salvage value= $30,000

Useful life= 10 year

Under the straight-line method of depreciation, the depreciation expense is constant along the useful life.

We need to use the following formula:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (800,000 - 30,000)/10

Annual depreciation= $77,000