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Scroll purchased equipment from Pirn for $36,000 on January 1, 20X1, that is depreciated using the straight-line method over four years. What amount should be reported as depreciation expense in Pirn’s 20X1 consolidated income statement?

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Answer:

Annual depreciation= $9,000 per year

Explanation:

Giving the following information:

Scroll purchased equipment from Pirn for $36,000 on January 1, 20X1, that is depreciated using the straight-line method over four years.

I will assume that the salvage value is cero. Using the straight-line method, we can calculate the annual depreciation using the following formula:

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

Annual depreciation= (36,000 - 0)/4= $9,000 per year

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