Luster Consulting Company purchased a new heating and cooling system for their office building in March, 2014. After installing and testing the equipment, it was put into service on April 1, 2014. The total cost to put the equipment into service was $45,000; it is expected to have a useful life of 10 years and a salvage value of $5,000. On December 31, 2014, assuming Luster Consulting Company uses straight-line depreciation, what will be the amount of depreciation expense on the books?

Question

Fiesta

Business

16 December, 10:37

Luster Consulting Company purchased a new heating and cooling system for their office building in March, 2014. After installing and testing the equipment, it was put into service on April 1, 2014. The total cost to put the equipment into service was $45,000; it is expected to have a useful life of 10 years and a salvage value of $5,000. On December 31, 2014, assuming Luster Consulting Company uses straight-line depreciation, what will be the amount of depreciation expense on the books?

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Leroy Sims · Answer 1

Amount of Depreciation expense 2250

Explanation:

Situation

Original Value: $45000

Residual Value: $22500

Useful life: 10 years

To get depreciation expense with Straight-line method you have to get the difference between Original Value and Residual Value, then you divide that difference by the useful life

depreciation expense = (45000-22500) / 10=2250