A five-year straight-line depreciation schedule

Problem

Compute Northline's Year 1 straight-line depreciation and ending schedule measures from $36,000 cost, $6,000 estimated residual value, and a five-year estimated useful life. Assume the equipment was available for administrative use for the full year, with no prior depreciation, impairment, or other adjustments. State what the result does not establish.

Build the schedule from named inputs

Keep two different questions separate before computing. Depreciable amount is the total allocation base. Carrying amount is the recorded amount that remains at a particular date. They happen to equal $30,000 after Year 1 in this scenario, but that numerical coincidence does not make them the same measure.

Depreciable amount
  $36,000 cost − $6,000 residual value = $30,000

Depreciation per full year
  $30,000 ÷ 5 years = $6,000

Accumulated depreciation after Year 1
  $6,000 × 1 elapsed year = $6,000

Carrying amount after Year 1
  $36,000 cost − $6,000 accumulated depreciation = $30,000

Remaining depreciable amount
  $30,000 depreciable amount − $6,000 allocated = $24,000

The two $30,000 results still answer the different questions identified before the schedule; their Year 1 equality is only numerical.

Five-year check

The Year 1 equality is temporary: carrying amount falls to $24,000 after Year 2 while the original $30,000 depreciable amount remains the total allocation base.

The schedule stops at the estimated $6,000 residual value under unchanged inputs. It does not prove the asset will sell for that amount or remain useful for exactly five years.

Effect of a different estimate

With $1,000 residual value and all other facts unchanged, depreciable amount is $36,000 − $1,000 = $35,000, and annual depreciation is $35,000 ÷ 5 = $7,000. The $1,000 annual difference shows the direction explicitly: a lower residual estimate raises the depreciable amount and therefore raises annual expense. That is why residual-value evidence matters. Management must use the estimate supported by the available evidence.

Interpretation

Year 1 expense is $6,000 and Year 1 ending carrying amount is $30,000. No Cash is generated by the schedule. Market value, physical condition, remaining capacity, impairment, and replacement financing require additional evidence.

Common wrong paths

• Divide cost by useful life: This ignores the stated residual value and produces $7,200 rather than $6,000.
• Call carrying amount market value: The schedule contains no market input.
• Treat accumulated depreciation as current expense: One is a cumulative balance; the other is one period's allocation.
• Add residual value after computing carrying amount: Residual value was already excluded from the depreciable base; adding it again double counts it.