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30 March, 05:22

On October 1, 2022, Sunland Company places a new asset into service. The cost of the asset is $124000 with an estimated 5-year life and $22000 salvage value at the end of its useful life. What is the depreciation expense for 2022 if Sunland Company uses the straight-line method of depreciation

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  1. 30 March, 05:34
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    The depreciation expense is $5,100

    Explanation:

    The depreciation expense under the straight line method is computed as:

    Depreciation expense = Asset Value - Salvage Value / Useful life of asset

    where

    Asset value is $124,000

    Salvage Value is $22,000

    Useful life of asset is 5 years

    And asset is purchased on October, So depreciation will be computed from October to December, So, the number of months are 3

    Depreciation expense = ($124,000 - $22,000) / 5 * 3 / 12

    = $102,000 / 5 * 3 / 12

    = $20,400 * 3 / 12

    = $5,100
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