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The depreciation deduction for year 11 of an asset with a 20-year useful life is $4,000. If the salvage value of the asset was estimated to be zero and straight line depreciation was used to calculate the depreciation deduction for year 11, what was the initial cost of the asset?

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Answer:

The answer is $80,000

Explanation:

The formula for straight-line depreciation is:

[Cost of asset - salvage value(if any)] ÷ useful life of the asset

Depreciation = $4,000

Cost of asset= ? (represented by y)

Useful life of the asset = 20 years

$4,000 = y ÷ 20 years

y is $4,000 x 20 years

y = $80,000

Therefore, the initial cost of the asset was $80,000

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