1. Virko Inc. buys a new computer for $180,000 on January 1, 2019.

It expects the computer to

last for four years. If the company's financial year is from January 1 to December 31, what will be
the value of the computer in Virko's statement of financial position at December 31, 2019 if the
company uses straight line depreciation method? Record this equipment’s depreciation expense
and accumulated depreciation on December 31, 2019.
Given,
Cost of purchase =$180,000
Date of purchase , January 1, 2019
Estimated Use of Economic Life = 4 years
Company’s Financial Year, January 1 to December 31,2019
The company uses straight line depreciation method
Required: recording equipment’s depreciation expense and accumulated depreciation on
December 31, 2019
Solution
In depreciation the residual value is the estimated scrap or salvage value at the end of the asset's useful
life.

Cost of Asset−Estimated Residual Value

Annual Depreciation =
Estimated Useful Economic LIfe
 In Straight line method depreciation is constant in each year
Let x be annual depreciation of the computer.
Cost of Asset Accumulated depreciation Net Value in statement of
financial position
End of year 1 x 180,000-x
End of year 2 2x 180,000-2x
End of year 3 3x 180,000-3x
End of year 4 4x 180,000-4x
End of year 5 5x=180,000 0

So Based on the above table, Annual depreciation x = 180,000/5=36,000

Based on the above calculation the value of the computer in Virko's statement of financial position at
December 31, 2019 is ($180,000-$36,000)= $144,000
That means the accumulated depreciation for the asset as of December 31,2019 is $36,000.

1
Before recording equipment’s depreciation expense and accumulated

We can put the above information by table as follows.

Original Accumulated Net value in the
Asset Cost Depreciation Statement of
Financial position for
this period
December 31,2019 $180,000 $36,0000 $144,000