Depreciation Methods – MCQ

Practice Question

Intro to Financial Accounting
Long-Lived Assets
Depreciation Methods
MCQs

A company has equipment that costs $50,000, with a residual value of $5,000 and a useful life of 10 years. What is the annual depreciation expense using the straight-line method?

  1. $5,000
  2. $4,500
  3. $10,000
  4. $45,000
Answer +
Correct Answer: B
Explanation +

Using the straight-line method, depreciation is calculated evenly over the asset's useful life. The formula is:

Depreciation Expense = (Cost - Residual Value) / Useful Life

= ($50,000 - $5,000) / 10 = $45,000 / 10 = $4,500 per year

This method simplifies expense planning and ensures consistent charges over the asset's lifetime.