Newman Co. purchased CNC router cutting and engraving machinery at a cost of $320,000 in January 2019. The company’s estimated useful life of this high tech equipment is 5 years, and the estimated salvage value is $48,000. Using the straight-line method, the depreciation expense to be recognized for 2019, the first year of the machinery’s life, would be:

The depreciation expense to be recognized for 2019 is $54,400

Explanation:

The company uses straight-line depreciation method, Depreciation Expense each year is calculated by following formula:  

Annual Depreciation Expense = (Cost of equipment − Salvage Value )/Useful Life

The high tech equipment was purchased at a cost of $320,000 and has estimated useful life of 5 years, the salvage value of $48,000.

Annual Depreciation Expense = ($320,000 - $48,000)/5 = $54,400

Newman Co. purchased the equipment in January 2019.

The depreciation expense to be recognized for 2019 is $54,400