Chapter 8 - Straight Line Depreciation Method example

The video tutorial explains the straight line method of depreciation, focusing on calculating total asset cost, creating journal entries, and understanding the impact on balance sheets. It covers the calculation of depreciation per year, the concept of depreciable base, and how to record depreciation in accounting books. The tutorial also addresses common questions and provides a practical example using a copy machine purchase.

What is the initial list price of the copy machine purchased by Papa Company?

• $14,250

• $15,000

• $13,500

• $16,000

How is the total asset cost calculated for the copy machine?

• List price plus discount minus delivery and installation costs

• List price minus delivery and installation costs

• List price plus delivery and installation costs

• List price minus discount plus delivery and installation costs

What is the annual depreciation expense for the copy machine using the straight line method?

• $2,400

• $4,000

• $3,200

• $2,000

In the straight line method, what is the significance of the depreciable base?

• It is the maximum amount that can be depreciated

• It is the total cost of the asset

• It is the annual depreciation expense

• It is the salvage value of the asset

What is the accumulated depreciation at the end of year 3?

• $12,000

• $9,600

• $7,200

• $4,800

How does the accumulated depreciation affect the book value of the asset on the balance sheet?

• It increases the book value

• It decreases the book value

• It has no effect on the book value

• It doubles the book value

What is the book value of the copy machine at the beginning of year 5?

• $6,400

• $4,000

• $8,800

• $12,000