On 30 April 2013, Tilton Products purchased machinery for $88,000. The useful life of this machinery is estimated at 8 years, with an $8,000 residual value.
-Refer to the above data. Assume that in its financial statements, Tilton Products uses straight-line depreciation and rounds depreciation for fractional years to the nearest month. Depreciation expense recognized on this machinery in 2013 and 2014 will be:

Question

Quizplus · Accepted Answer

First, we need to calculate the annual depreciation. The machinery has a useful life of 8 years, so the annual depreciation would be $40,000/8 = $5,000.

Now, we need to calculate the depreciation expense for the partial year 2013. The machinery was purchased on September 1, which means that Tilton Products will use the machinery for 4 months in 2013 (September to December). The depreciation expense for this period will be:

($5,000/12) x 4 = $1,667 (rounded to the nearest dollar)

For the year 2014, the depreciation expense will be the full year amount of $5,000.

So, the total depreciation expense recognized on this machinery in 2013 and 2014 will be:

2013: $1,667
2014: $5,000

Therefore, Choice C ($6,667 in 2013 and $10,000 in 2014) is the correct answer.

On 30 April 2013, Tilton Products Purchased Machinery for $88,000