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Blue Spruce Corp. purchased equipment on January 1, 2021 for $162,000. It is estimated that the equipment will have a $9,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 180,000 units over its 5-year life.
Answer the following independent questions.
Compute the amount of depreciation expense for the year ended December 31, 2021 using the straight-line method of depreciation.

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Answer:

Annual depreciation= $30,600

Explanation:

Giving the following information:

Purchase price=$162,000

Salvage value= $9,000

Useful life= 5 years

To calculate the annual depreciation, we need to use the following formula:

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

Annual depreciation= (162,000 - 9,000) / 5

Annual depreciation= $30,600