The Rogers Company uses the straight-line method to depreciate its equipment.On May 1, 2010, the company purchased some equipment for $200, 000.The equipment is estimated to have a useful life of ten years and a salvage value of $20, 000.If depreciation is to be recorded for each month the equipment is owned, how much depreciation expense should Rogers record for the equipment in the adjusting entry on December 31, 2010?

Question

Quizplus · Accepted Answer

The annual depreciation expense for the equipment is calculated as follows:
Cost - Salvage value / Useful life in years = ($200,000 - $20,000) / 10 = $18,000 per year
Since depreciation is recorded for each month the equipment is owned, the monthly depreciation expense is $18,000 / 12 = $1,500
To record depreciation for the equipment in the adjusting entry on December 31, 2010 (which is 8 months after May 1, 2010, the purchase date), we need to multiply the monthly depreciation expense by 8:
$1,500 x 8 = $12,000.

Therefore, the correct choice is C, $12,000.

The Rogers Company Uses the Straight-Line Method to Depreciate Its