On January 1, 2018, Jordan, Inc. acquired a machine for $ 1 comma 040 comma 000. The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be $ 55 comma 000. Calculate the depreciation expense per year using the straightminusline method.

Annual depreciation = $197,000

Explanation:

Giving the following information:

Purchasing price = $1,040,000

Residual value = $55,000

Useful life in years = 5

Under the straight-line method, the annual depreciation is the same during the useful life of the machine. To calculate the annual depreciation, we need to use the following formula:

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

Annual depreciation = (1,040,000 - 55,000) / 5 = $197,000