A company purchased a computer for \$1,500. The computer has an estimated useful life of 3 years and no residual value. Using the straight-line method, what is the annual depreciation expense?

• A. \$500
• B. \$300
• C. \$600
• D. \$400

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the straight-line depreciation method. This method allocates the cost of an asset evenly over its useful life. The formula for annual depreciation expense is: \( \text{Annual Depreciation Expense} = \frac{\text{Cost of Asset} - \text{Residual Value}}{\text{Useful Life}} \).
2. Step 2: Identify the values given in the problem. The cost of the computer is \$1,500, the residual value is \$0, and the useful life is 3 years.
3. Step 3: Substitute the values into the formula. \( \text{Annual Depreciation Expense} = \frac{1500 - 0}{3} \).
4. Step 4: Simplify the numerator by subtracting the residual value from the cost of the asset. \( \text{Annual Depreciation Expense} = \frac{1500}{3} \).
5. Step 5: Divide the result to find the annual depreciation expense. This will give you the amount allocated each year for depreciation.