Chapter 11, Problem 2CPA

To determine

Depreciation:

Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life. The following is the formula to calculate the depreciation.

Straight-line method:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.

$\text{Depreciation cost = }\frac{\text{Cost of the asset-Salvage value}}{\text{Estimated useful life of the asset}}$

To Calculate: The depreciation amount for the year 2.