A company purchased new furniture at a cost of $14,000 on September 30.The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000.The company uses the straight-line method of depreciation.How much depreciation expense will be recorded for the furniture for the first year ended December 31?
A)$437.50
B)$375.00
C)$1,500.00
D)$500
E)$1,750

Question

Quizplus · Accepted Answer

Straight-line depreciation method formula is:

Depreciation expense = (Cost of the asset - Salvage value) / Useful life

Depreciation expense = ($14,000 - $2,000) / 8 = $1,500 per year

Since the furniture was purchased on September 30, it was used for only 3 months in the first year. Therefore, depreciation expense for the first year would be:

Depreciation expense = $1,500 / 12 x 3 = $375.00.

Therefore, the correct answer is B.

A Company Purchased New Furniture at a Cost of $14,000