On January 4, 2017, Mary's Cafe acquired equipment for $700,000. The estimated life of the equipment is 8 years or 60,000 hours. The estimated residual value is $60,000 What is the balance in the Accumulated Depreciation account at December 31, 2018 if the straight-line method is used?

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Quizplus · Accepted Answer

The annual depreciation expense using the straight-line method is calculated as (Cost - Residual Value) / Useful Life = ($700,000 - $60,000) / 8 = $80,000. For two years (2017 and 2018), the accumulated depreciation would be $80,000 * 2 = $160,000.

On January 4, 2017, Mary's Cafe Acquired Equipment for $700,000