What is the correct annual depreciation under straight-line method for cost 10,000, salvage 1,000, life 9 years?

• A. 9,000 per year.
• B. 1,111 per year.
• C. 1,000 per year.
• D. 9,999 per year.

Answer: (C)

Straight-line depreciation allocates the asset’s depreciable base evenly over its useful life. The depreciable base is the cost minus the salvage value. Here, that base is 10,000 − 1,000 = 9,000. Spread over 9 years, the annual depreciation is 9,000 ÷ 9 = 1,000 per year. If you don’t subtract salvage, you’d get about 1,111 per year (10,000 ÷ 9), which isn’t correct because salvage value isn’t depreciated. So the correct annual depreciation is 1,000 per year.