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13 January, 03:05

On October 1, 2022, Sheridan Company places a new asset into service. The cost of the asset is $81000 with an estimated 5-year life and $21000 salvage value at the end of its useful life. What is the depreciation expense for 2022 if Sheridan Company uses the straight-line method of depreciation

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  1. 13 January, 06:43
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    the depreciation expense for 2022 is $3,000

    Explanation:

    Straight line method of depreciation charges a fixed amount of depreciation over the period of use of an asset.

    Depreciation Expense = (Cost - Residual Value) / Number of useful life

    = ($81000 - $21000) / 5

    = $12,000

    The Annual depreciation charge for this machine will be $12,000 for each of the years that it is used in the business.

    However since it was paced in use during the year that is 1 October, we have to apportion the Annual charge withe number of months that its has been in use during 2022.

    It has been used for 3 months thus depreciation charge is:

    Depreciation = 3 / 12 * $12,000

    = $3,000
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