To prepare a depreciation schedule for the life of the asset under the straight-line method, we need to follow these steps:

Step 1: Determine Depreciable Amount

• Cost of the equipment: $138,700
• Residual value: $14,500
• Depreciable amount: $138,700 - 14,500 = 124,200$

Step 2: Calculate the Straight-Line Depreciation Rate

• Useful life: 4 years (as given)

The depreciation rate per year is calculated as:

$\text{Annual depreciation expense} = \frac{\text{Depreciable amount}}{\text{Useful life}} = \frac{124,200}{4} = 31,050 \, \text{per year}$

However, since the equipment was purchased on April 22, 2023, the depreciation for 2023 will be prorated based on the months used.

• From April 22, 2023 to December 31, 2023, the equipment is used for 8 months. The partial depreciation for 2023 will be:

$\text{2023 Depreciation} = 31,050 \times \frac{8}{12} = 20,700$

Step 3: Prepare the Depreciation Schedule

Summary:

• Depreciable amount: $124,200
• Annual depreciation rate: $31,050 (except prorated for 2023 and 2027)
• The carrying amount at the end of the asset's life will be the residual value of $14,500.

Would you like further details on any part of this calculation?

Here are 5 questions to deepen understanding:

1. How is depreciation prorated when an asset is purchased mid-year?
2. What are the differences between straight-line and usage-based depreciation?
3. How would salvage value affect depreciation in other methods?
4. Why does the accumulated depreciation increase each year?
5. What happens to depreciation after the asset reaches its residual value?

Tip: Always check the purchase date of an asset to accurately calculate the depreciation for the first and last years!