On June 1, 2014, Aaron 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 and 30,000 hours. Using straight line depreciation, calculate depreciation expense for the last year.
A) $17,500
B) $30,000
C) $12,500
D) $40,000

Question

Quizplus · Accepted Answer

The depreciable cost is $90,000 ($120,000 - $30,000 salvage value). The annual depreciation expense using straight line method is calculated as depreciable cost divided by useful life, which is $30,000 ($90,000/3). Since this is the last year of the useful life, we only need to calculate depreciation expense for one year, which is $12,500 ($30,000/2). Therefore, the correct answer is C.

On June 1, 2014, Aaron Company Purchased Equipment at a Cost