On January 2,2016 McNally's Extra Corporation acquired equipment for $120,000.The estimated life of the equipment is 5 years or 20,000 hours.The estimated residual value is $20,000.If McNally's Extra Corporation uses the straight-line method of depreciation,what will be the debit to Depreciation Expense for the year ended December 31,2017,during which period the asset was used 4,500 hours?

Question

Quizplus · Accepted Answer

The straight-line method of depreciation calculates annual depreciation by subtracting the residual value from the cost and dividing by the useful life. For this equipment: ($120,000 - $20,000) / 5 years = $20,000 per year.

On January 2,2016 McNally's Extra Corporation Acquired Equipment for $120,000