Bombay Inc.bought new computers on January 1 for $18,000 to improve the quality of their animation.The computers have a useful life of 8 years but Bombay Inc.thinks that continuing technological developments will likely mean they will replace the computers after 4 years,at which time they will be worth $2,000.If they use straight-line depreciation,the depreciation expense for the first year will be
A)$2,000.
B)$2,250.
C)$4,000.
D)$4,500.

Question

Quizplus · Accepted Answer

To calculate straight-line depreciation, we need to first find the depreciable cost, which is the original cost minus the estimated salvage value. 
Depreciable cost = $18,000 - $2,000 = $16,000

Next, we divide the depreciable cost by the useful life in years to get the annual depreciation expense. 
Annual depreciation expense = Depreciable cost / Useful life = $16,000 / 8 = $2,000

Therefore, the depreciation expense for the first year will be $2,000.