Using straight-line depreciation, what is the annual depreciation expense for an asset with an initial value of $12,000, a salvage value of $0, and a useful life of 6 years?

Using straight-line depreciation, what is the annual depreciation expense for an asset with an initial value of $12,000, a salvage value of $0, and a useful life of 6 years?

• A. $2,000
• B. $4,000
• C. $6,000
• D. $12,000

Answer: (A)

Straight-line depreciation spreads the asset’s cost evenly over its useful life, after accounting for any salvage value. Here, you start with the cost of 12,000 and subtract the salvage value of 0, leaving 12,000 to allocate over 6 years. Dividing gives 12,000 / 6 = 2,000 per year. So the annual depreciation expense is 2,000. The other options would require dividing by fewer years or ignoring the salvage value, which isn’t consistent with straight-line depreciation.

Straight-line depreciation spreads the asset’s cost evenly over its useful life, after accounting for any salvage value. Here, you start with the cost of 12,000 and subtract the salvage value of 0, leaving 12,000 to allocate over 6 years. Dividing gives 12,000 / 6 = 2,000 per year. So the annual depreciation expense is 2,000. The other options would require dividing by fewer years or ignoring the salvage value, which isn’t consistent with straight-line depreciation.