Equipment cost is $48,000, salvage value is $6,000, and useful life is 7 years. What is annual straight-line depreciation?
Correct Answer
A) $6,000.
Depreciable base is $48,000 - $6,000 = $42,000. Annual straight-line depreciation is $42,000 / 7 = $6,000.
Why This Is the Correct Answer
Depreciable base is $48,000 - $6,000 = $42,000. Annual straight-line depreciation is $42,000 / 7 = $6,000.
Why the Other Options Are Wrong
Option B: $6,857.
$6,857 leaves out the $6,000 salvage value. The correct calculation is 48,000 - 6,000 = 42,000; 42,000 / 7 = 6,000.
Option C: $7,714.
$7,714 adds the $6,000 salvage value instead of subtracting it. The correct calculation is 48,000 - 6,000 = 42,000; 42,000 / 7 = 6,000.
Option D: $42,000.
$42,000 stops at the first result and never finishes the calculation. The correct calculation is 48,000 - 6,000 = 42,000; 42,000 / 7 = 6,000.
Reference Hint
Study anchor (closed-book): memorize Depreciation from CSLB Law and Business Study Guide; CSLB 2026 Law Book / CSLB Law and Business Study Guide Business Finances; know the rule or calculation trigger without relying on exam-room lookup.
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