The capital cost to establish the Custom Finish Lab will be $1,650,000. This cost will depreciated on the straight-line basis to zero over the 8 year productive life of the lab. It is estimated $100,000 will be recovered at the completion of the project as the salvage value of the lab.
here, doi have deducted salvage value in the calculation of depreciation or not?
Hi Rinku, yes salvage value must be deducted.
Here is the formula to calculate annual depreciation expense using straight line depreciation:
Cost Basis of Fixed Asset minus (-) Salvage Value divided by Estimated Useful Life
You can learn more about how straight line depreciation works in this article:
Thank you for reading!
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