On april 1st, 2017, sticky company placed a new asset into service. the cost of the asset was $100,000 with an estimated 5-year life and $20,000 salvage value. what is the depreciation expense for 2017 if sticky company uses the straight-line method of depreciation?

$12,000

Explanation:

To ascertain straight line depreciation, you should divide the distinction between the salvage value and the cost of the equipment, additionally alluded to as the depreciable base or asset cost, with the normal life of the equipment.

The correct answer is $16,000

To determine the company depreciation expense using the straight-line method of depreciation, then we have to subtract the original cost from the residual value and then divide the value we get from the useful life.

Now going by the formula, we have:

(Original cost – residual cost) ÷ Useful life

= ($100,000 - $20,000) ÷ (5 years)

= ($80,000) ÷ (5 years)

= 80,000/5

= $16,000

Thus, if Sticky Company uses the straight line method of depreciation, its depreciation expense for 2017 is $16,000.

Company uses straight line method to calculate depreciation and amortization. It is also known as straight line basis. This method is no doubt the simplest way a company can calculate the loss of value of an asset over a period of time.

This method is calculated by subtracting the company’s asset cost from its expected value and divide the derived value by the number of years the assets is expected to be used.

Straight line method is very easy to use and can only provide fewer errors when determining the loss value of an asset.

Straight line method also uses three variables to determine the amount of depreciation over time.

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