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Cutter Enterprises purchased equipment for $72,000 on January 1, 2010. The equipment is expected to have a five-year life, with a residual value of $6,000 at the end of five years. Using the straight-line method, depreciation expense for 2010 would be:

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Answer:

Annual depreciation= $13,200

Explanation:

Giving the following information:

Cutter Enterprises purchased equipment for $72,000 on January 1, 2010. The residual value of $6,000 at the end of five years.

Under the straight-line method, the annual depreciation is constant trough the entire useful life. We need to use the following formula:

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

Annual depreciation= (72,000 - 6,000)/5= $13,200