On January 2, 2017, Kaiman Corporation acquired equipment for $700,000. The estimated life of the equipment is 5 years or 100,000 hours. The estimated residual value is $10,000. What is the balance in Accumulated Depreciation on December 31, 2018, if Kaiman Corporation uses the straight-line method of depreciation?

Question

Quizplus · Accepted Answer

The straight-line depreciation method calculates annual depreciation as (Cost - Residual Value) / Useful Life. For Kaiman Corporation, this is ($700,000 - $10,000) / 5 = $138,000 per year. Over two years (2017 and 2018), the accumulated depreciation is $138,000 * 2 = $276,000.

On January 2, 2017, Kaiman Corporation Acquired Equipment for $700,000