On June 1, Scotter Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours.
Using straight-line depreciation, calculate depreciation expense for the first year, which ends on December 31.
A) $17,500
B) $30,000
C) $12,500
D) $40,000

Question

On June 1, Scotter Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours.  
Using straight-line depreciation, calculate depreciation expense for the first year, which ends on December 31.
A) $17,500
B) $30,000
C) $12,500
D) $40,000

Quizplus · Accepted Answer

Annual Depreciation = Depreciable Cost / Useful Life = $90,000 / 3 = $30,000
Depreciation expense for the second year = ($30,000 /12) × 7 = $17,500

On June 1, Scotter Company Purchased Equipment at a Cost