On May 1, 2018, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2011. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. What depreciation expense should be recorded on this asset in 2018?

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life = ($750,000 - $75,000) / 10 = $67,500. Since the asset is sold on May 1, 2018, only 4 months of depreciation is recorded for 2018: ($67,500 / 12) * 4 = $22,500.

On May 1, 2018, Pinkley Company Sells Office Furniture for $300,000