what is straight line depreciation?

label Accounting
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

(Accounting) $120,000 equipment purchased with $20,000 cash and a one year note payable for $100,000 plus interest at annual rate of 9%. The equipment is being depreciated by the straight line method over 20 years.

Jul 8th, 2015

Thank you for the opportunity to help you with your question!

Capitalized cost = $120,000

The interest amounts are expensed and not added to capital value of fixed asset.

Hence depreciation will be provided on 120,000

The amount of depreciation per year = 120,000/20 = $6,000

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 8th, 2015

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