Machinery having a four-year useful life and a residual value of $5,000 was acquired for $65,000 cash on June 28.Using the nearest whole month method,the company would recognize $11,250 for depreciation expense at the end of the first year,December 31.

Question

Quizplus · Accepted Answer

Using the nearest whole month method, the depreciation expense is calculated by dividing the depreciable cost (original cost minus residual value) by the useful life (in months) and multiplying it by the number of months in the current year.

In this case, the depreciable cost is $60,000 ($65,000 cost minus $5,000 residual value) and the useful life is 48 months.

For the first year ending December 31, only 6 months have passed since the acquisition date of June 28. So, the depreciation expense would be calculated as follows:

($60,000 ÷ 48) x 6 = $7,500

Therefore, the statement in the question is false.

Machinery Having a Four-Year Useful Life and a Residual Value