Use straight line (SL) depreciation to determine a. annual depreciation charge (5 points) and b. annual book values for the life of the asset having the price of $1,200,000, depreciable life of 8 years, and the salvage value of $200,000. (10 points)

Explanation:

The computation is shown below:

Year            Depreciation                Book value

0                                                      $1,200,000

1                   $125,000                    $1,075,000

2                  $125,000                    $950,000

3                  $125,000                    $825,000

4                  $125,000                    $700,000

5                  $125,000                    $575,000

6                  $125,000                    $450,000

7                  $125,000                     $325,000

8                  $125,000                     $200,000

The depreciation expense is

= ($1,200,000 - $200,000) ÷ (8 years)

= $125,000

d. the economy will face inflation.