To prepare a depreciation schedule using the straight-line method, we'll follow these steps:

Step 1: Calculate Straight-Line Depreciation

The straight-line depreciation formula is:

$\text{Depreciation Expense per Year} = \frac{\text{Cost of Asset} - \text{Residual Value}}{\text{Useful Life (in years)}}$

Where:

• Cost of Asset = $138,700
• Residual Value = $14,500
• Useful Life = 4 years

So,

$\text{Depreciation Expense per Year} = \frac{138,700 - 14,500}{4} = \frac{124,200}{4} = 31,050$

Step 2: Prorate Depreciation for 2023 (Partial Year)

Since the equipment was purchased on April 22, 2023, the depreciation for 2023 is prorated. From April 22 to December 31 is 8 months. Therefore, the prorated depreciation for 2023 is calculated as:

$\text{Depreciation for 2023} = 31,050 \times \frac{8}{12} = 31,050 \times 0.6667 = 20,700$

Step 3: Prepare the Depreciation Schedule

Now, we can prepare the depreciation schedule for the four-year life of the equipment:

Year	Depreciation Expense	Accumulated Depreciation	Book Value at Year-End
2023	20,700	20,700	118,000
2024	31,050	51,750	86,950
2025	31,050	82,800	55,900
2026	31,050	113,850	24,850
2027	10,350 (Remaining)	124,200	14,500 (Residual Value)

Explanation:

• 2023 Depreciation: $20,700 is calculated based on 8/12 of the annual depreciation.
• 2024-2026 Depreciation: Full-year depreciation of $31,050 for each year.
• 2027 Depreciation: Since we stop depreciating when the book value reaches the residual value of $14,500, only $10,350 is needed to reach the residual value.

Would you like further clarifications on any steps or additional details?

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Related Questions:

1. How is the straight-line method different from the units-of-production method?
2. What would the depreciation schedule look like if the equipment was purchased in January 2023?
3. How does the residual value impact the depreciation expense?
4. How would the depreciation schedule change if the useful life was extended to 5 years?
5. What are the advantages of using the straight-line method over other methods?

Tip:

When calculating depreciation, always consider whether the asset is used for a full year or part of the year. Prorating for partial periods is a key step in accurate financial reporting.