If a company purchases equipment for R300 000 with a residual value of R30 000 and a useful life of 3 years, the annual straight-line depreciation is R90 000.

Economics
If a company purchases equipment for R300 000 with a residual value of R30 000 and a useful life of 3 years, the annual straight-line depreciation is R90 000.

ScanSolve AI Answer

Answer

True

Step 1: Recall the formula for straight-line depreciation. The straight-line depreciation method allocates an equal amount of depreciation expense to each full period of an asset's useful life.

AnnualDepreciation=CostofAsset−ResidualValueUsefulLifeAnnual Depreciation = \frac{Cost of Asset - Residual Value}{Useful Life}

Step 2: Identify the given values from the problem.

  • Cost of Asset = R300 000
  • Residual Value = R30 000
  • Useful Life = 3 years

Step 3: Substitute the values into the formula and calculate the annual depreciation.

AnnualDepreciation=R300 000−R30 0003yearsAnnual Depreciation = \frac{R300\,000 - R30\,000}{3 years} AnnualDepreciation=R270 0003yearsAnnual Depreciation = \frac{R270\,000}{3 years} AnnualDepreciation=R90 000peryearAnnual Depreciation = R90\,000 per year

Step 4: Compare the calculated annual depreciation with the statement. The calculated annual straight-line depreciation is R90 000, which matches the amount stated in the problem.

The statement is True.

\text{True}

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Quick Answer

Recall the formula for straight-line depreciation. The straight-line depreciation method allocates an equal amount of depreciation expense to each full period of an asset's useful life.

If a company purchases equipment for R300 000 with a residual value of R30 000 and a useful life of 3 years, the annual straight-line depreciation is R90 000.
Economics

This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.

ScanSolve AI Answer
Step 1: Recall the formula for straight-line depreciation. The straight-line depreciation method allocates an equal amount of depreciation expense to each full period of an asset's useful life. Annual Depreciation = Cost of Asset - Residual ValueUseful Life Step 2: Identify the given values from the problem. Cost of Asset = R300 000 Residual Value = R30 000 Useful Life = 3 years Step 3: Substitute the values into the formula and calculate the annual depreciation. Annual Depreciation = R300\,000 - R30\,0003 years Annual Depreciation = R270\,0003 years Annual Depreciation = R90\,000 per year Step 4: Compare the calculated annual depreciation with the statement. The calculated annual straight-line depreciation is R90 000, which matches the amount stated in the problem. The statement is True. True