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Concept Introduction:
This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
Requirement-1:
To Calculate:
The annual depreciation expense using the straight line depreciation method
Answer to Problem 4BTN
The annual depreciation expense using the straight line depreciation method is $10,500
Explanation of Solution
The annual depreciation expense using the straight line depreciation method is calculated as follows;
= (44000-2000)/4
= $10,500
Concept Introduction:
Straight line method of depreciation:
This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
Requirement-2:
To indicate:
The recording of the annual depreciation expense using the straight line depreciation method
Answer to Problem 4BTN
The recording of the annual depreciation expense using the straight line depreciation method is as follows:
Account title Debit Credit
Depreciation Expense-Van $10,500
(Being depreciation expense recorded)
Explanation of Solution
The annual depreciation expense using the straight line depreciation method is calculated as follows;
= (44000-2000)/4
= $10,500
The recording of the annual depreciation expense using the straight line depreciation method is as follows:
Account title Debit Credit
Depreciation Expense-Van $10,500
Accumulated depreciation- Van $10,500
(Being depreciation expense recorded)
Concept Introduction:
Straight line method of depreciation:
This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
Requirement-3:
To indicate:
The impact of the straight line method on the income over the life of the asset
Answer to Problem 4BTN
Straight line method of depreciation affects the net income equally for each year over the life of the asset.
Explanation of Solution
Straight line method of depreciation:
This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
The depreciation expense amount remain same under the Straight line method of depreciation, hence it affects the net income equally for each year over the life of the asset.
Concept Introduction:
Straight line method of depreciation:
This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
Requirement-4:
To indicate:
The book value of the asset for each year of its life using the straight line method of the depreciation and reporting for one year
Answer to Problem 4BTN
The book value of the asset for each year of its life using the straight line method of the depreciation is as follows:
| Year | Ending Book value |
| 1 | $ 33,500 |
| 2 | $ 23,000 |
| 3 | $ 12,500 |
| 4 | $2,000 |
The reporting for the first year in the
Property, Plant and Equipment:
Van
$44,000
Less Accumulated depreciation −Van
-$10,500
Net Book value
$33,500
Explanation of Solution
The book value of the asset for each year of its life using the straight line method of the depreciation is calculated as follows:
| Year | Cost of the asset | Depreciation expense | Accumulated Depreciation | Ending Book value |
| A | B | C | D =A-C | |
| 1 | $ 44,000 | $10,500 | $ 10,500 | $ 33,500 |
| 2 | $ 44,000 | $10,500 | $ 21,000 | $ 23,000 |
| 3 | $ 44,000 | $10,500 | $ 31,500 | $ 12,500 |
| 4 | $ 44,000 | $10,500 | $ 42,000 | $2,000 |
The reporting for the first year in the balance sheet shall be as follows:
Property, Plant and Equipment:
Van $44,000
Less Accumulated depreciation −Van -$10,500
Net Book value $33,500
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