What is the depreciation expense?
For Sara’s business above she purchased $50,000 of fixed assets for her spa (20×2). It will be depreciated on a straight-line basis over 10 years. What is the depreciation expense? Fast forward to January 20×3, Sara’s business is doing well and she is expanding. In January 20×3 Sara had to purchase new equipment costing $100,000. (Again, assume a 10-year life) What will her depreciation expense be for that year?