A Company Purchased a Plant Asset for $60,000

question 60

True/False

A company purchased a plant asset for $60,000. The asset has an estimated salvage value of $4,000, and an estimated useful life of 7 years. The annual depreciation expense using the straight-line method is $4,000 per year.
Depreciation Expense = (Cost - Salvage Value)/Estimated Useful Life
Depreciation Expense = ($60,000 - $4,000)/7; Depreciation Expense = $8,000

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Definitions:

Expenses

The money spent or costs incurred by a business in the process of earning revenue.

Common Stock

Common Stock represents ownership shares in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Revenues

The total income generated from normal business operations and other activities, such as the sale of goods or services.

Credit

An accounting entry that either increases a liability or equity account, or decreases an asset or expense account. It is also used in banking to denote a positive balance.