Asked by Anita Gallegos on Jul 08, 2024
Verified
A company purchased factory equipment on June 1 2017 for $160000. It is estimated that the equipment will have a $10000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation the amount to be recorded as depreciation expense at December 31 2017 is
A) $15000.
B) $8750.
C) $7500.
D) $6250.
Straight-Line Method
A method of calculating depreciation of an asset, which evenly spreads the cost over its useful life.
Salvage Value
The estimated resale value of an asset at the end of its useful life, used in calculating depreciation expenses.
Depreciation Expense
The allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.
- Evaluate the expense of depreciation using a range of methods encompassing straight-line, double-declining balance, and units-of-activity.
Verified Answer
SY
Shilpa YadavJul 14, 2024
Final Answer :
B
Explanation :
The straight-line depreciation method calculates equal depreciation expenses each year over the useful life of the equipment. The formula is: (Cost - Salvage Value) / Useful Life. For this equipment, the depreciation per year is ($160,000 - $10,000) / 10 = $15,000 per year. Since the equipment was purchased on June 1, only 7 months of depreciation should be accounted for in 2017. Therefore, the depreciation expense for 2017 is $15,000 * (7/12) = $8,750.
Learning Objectives
- Evaluate the expense of depreciation using a range of methods encompassing straight-line, double-declining balance, and units-of-activity.