DLW, Inc just started its business. DLW purchased factory equipment for $800,000 on January 1. It is estimated that the equipment will have a $30,000 salvage value at the end of its estimated 10-year useful life. If the company uses the straight-line method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be:

Annual depreciation = $77,000

Explanation:

Giving the following information:

Purchase price = $800,000

Salvage value = $30,000

Useful life = 10 year

Under the straight-line method of depreciation, the depreciation expense is constant along the useful life.

We need to use the following formula:

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

Annual depreciation = (800,000 - 30,000) / 10

Annual depreciation = $77,000