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Question 3.2: A machine costs £11,000 and has an estimated value of £1,000...

A machine costs £11,000 and has an estimated value of £1,000 at the end of its five-year life.

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The straight-line method takes the residual value from the original cost and divides by five, giving a depreciation charge of £2,000 per annum as follows:

\begin{array}{rlr}\frac{\text { Cost of machine }-\text { resale value }}{\text { Expected life }} & = & \frac{£ 11,000-£ 1,000}{5} \\\\& = & £ 2,000 \text { pa }\end{array}

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