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Yesterday, 03:43

A firm is considering purchasing two assets. Asset L will have a useful life of 15 years and cost $4 million; it will have installation costs of $750,000 but no salvage or residual value. Asset S will have a useful life of 5 years and cost $2 million; it will have installation costs of $500,000 and a salvage or residual value of $400,000. Which asset will have a greater annual straightminusline depreciation?

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  1. Yesterday, 04:08
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    D. Asset S has $103,333 more in depreciation per year.

    Explanation:

    For computing the greater annual straight minus line depreciation first we have to determine the each assets depreciation expense which is shown below:

    For Asset L

    = (Original cost + installation cost - salvage value) : (useful life)

    = ($4,000,000 million + $750,000 - $0) : (15 years)

    = $316,666.67

    For Asset S

    = (Original cost + installation cost - salvage value) : (useful life)

    = ($2,000,000 million + $500,000 - $400,000) : (5 years)

    = $420,000

    As we can see that the Asset S has high annual straight-line depreciation

    And, the amount exceed is $103,333.33
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