Bates Company purchased equipment on January 1, 2016, at a total invoice cost of $1,200,000. The equipment has an estimated salvage value of $30,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?
A)$240,000.
B)$480,000.
C)$234,000.
D)$468,000.

Question

Quizplus · Accepted Answer

First, we need to calculate the annual depreciation expense:

Cost - Salvage value = depreciable cost

$1,200,000 - $30,000 = $1,170,000

Depreciable cost / useful life = annual depreciation expense

$1,170,000 / 5 = $234,000

To find the accumulated depreciation at December 31, 2017, we need to multiply the annual depreciation expense by the number of years the equipment has been in use:

$234,000 x 2 = $468,000

Therefore, the accumulated depreciation at December 31, 2017 is $468,000.

Bates Company Purchased Equipment on January 1, 2016, at a Total