Kansas Enterprises purchased equipment for $72,500 on January 1, 2021. The equipment is expected to have a five-year service life, with a residual value of $7,650 at the end of five years. Using the straight-line method, depreciation expense for 2021 would be:

Annual depreciation = $12,970

Explanation:

Giving the following information:

Kansas Enterprises purchased equipment for $72,500 on January 1, 2021. The equipment is expected to have a five-year service life, with a residual value of $7,650 at the end of five years.

To calculate the depreciation expense under the straight-line method, we need to use the following formula:

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

Annual depreciation = (72,500 - 7,650) / 5

Annual depreciation = $12,970