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On June 1, Michael Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours. Using straight-line depreciation, calculate depreciation expense for the second year.

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Answer:

Annual depreciation= $30,000

Explanation:

Giving the following information:

Purchasing price= $120,000

Salvage cost= $30,000

Depreciable cost= $90,000

Useful life= 3 years.

To calculate the depreciation expense under the straight-line method, we need to use the following formula:

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

Annual depreciation= 90,000/3= $30,000

The depreciation expense is the same in all 3 years.

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