\begin{tabular}{|l|}\hline Cuestion 8 \\ \hline A firm is considering purchasing an asset that will have a useful life of \\ \( \mathbf{1 5} \) years and cost \( \$ 7.5 \) million; it will have installation costs of \\ \( \$ 380,000 \) and a salvage or residual value of \( \$ 1,800,000 \). What is the \\ annual straight-line depreciation for this asset? \\ \hline O \( \$ 530,450 \) per year \\ \hline\( \$ 400,000 \) per year \\ \hline\( \$ 422,000 \) per year \\ \hline O \( \$ 498,750 \) per year \end{tabular}

To determine the annual straight-line depreciation, we first need to compute the total cost of the asset minus its salvage value. The total cost includes the purchase price and installation costs: Total cost = Purchase price + Installation costs = \( \$ 7,500,000 + \$ 380,000 = \$ 7,880,000 \). Next, we subtract the salvage value from this total cost: Depreciable amount = Total cost - Salvage value = \( \$ 7,880,000 - \$ 1,800,000 = \$ 6,080,000 \). Finally, we divide the depreciable amount by the useful life of the asset (15 years): Annual depreciation = Depreciable amount / Useful life = \( \frac{\$ 6,080,000}{15} = \$ 405,333.33 \). The options listed do not include this amount, so it's important to check your calculations or consider rounding errors. Now, let’s explore some fun facts! If you think accounting is dry, think again! The history of depreciation stretches back thousands of years. Ancient civilizations recognized the need to account for the loss of value in assets over time—imagine a 5,000-year-old accountant nervously watching his temple’s stone pillars crumble! And speaking of real-world application, mastering depreciation isn’t just for accountants! Knowing how depreciation works can help business owners make informed choices about asset management and taxes, ultimately aiding in cash flow decision-making that fuels growth. So, knowing how to calculate this can be a game-changer for your business savvy!