Asked by Heidi Canaveral on Jun 14, 2024
Verified
Three years ago a piece of equipment was purchased for $10,000. Assuming an eight-year life and straight-line depreciation, financial statements for the third year will show:
A) depreciation expense of $3,000 on the income statement, and accumulated depreciation of $3,000 on the balance sheet.
B) depreciation expense of $1,250 on the income statement, and accumulated depreciation of $3,000 on the balance sheet.
C) depreciation expense of $1,250 on the income statement, and accumulated depreciation of $3,750 on the balance sheet.
D) depreciation expense of $1,250 on the income statement, and accumulated depreciation of $1,250 on the balance sheet.
Straight-Line Depreciation
A technique for distributing the expense of a physical asset evenly across its lifespan in yearly increments.
Depreciation Expense
An accounting method of allocating the cost of a tangible asset over its useful life to account for declines in value.
Accumulated Depreciation
The total amount of depreciation expense that has been recorded for an asset since it was acquired, reducing its book value on the balance sheet.
- Apply depreciation calculations and understand their impact on financial statements.
Verified Answer
MA
Maysa Al-HijaziJun 15, 2024
Final Answer :
C
Explanation :
Straight-line depreciation divides the cost of the equipment by its useful life to find annual depreciation. $10,000 / 8 years = $1,250 per year. After three years, accumulated depreciation is $1,250 * 3 = $3,750.
Learning Objectives
- Apply depreciation calculations and understand their impact on financial statements.