Chapter 7, Problem 7.7BE

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.

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

The following are the three types of depreciation:

• Straight-line method
• Declining- balance method
• Activity-based method

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.

To calculate: The depreciaiton expenses for 2015 and 2016 using straight-line method.