A company purchased equipment for $65,000 with a salvage value of $5,000 on April 1,Year 1.It has an estimated useful life of 5 years.Using the straight-line method,how much depreciation expense should the company recognize on December 31,Year 1?

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Quizplus · Accepted Answer

The straight-line depreciation method spreads the cost of the equipment evenly over its useful life. The annual depreciation is calculated as (Cost - Salvage Value) / Useful Life. For this equipment, it's ($65,000 - $5,000) / 5 = $12,000 per year. Since the equipment was purchased on April 1, only 9 months of depreciation should be recognized in Year 1. Therefore, the depreciation expense for Year 1 is $12,000 * (9/12) = $9,000.

A Company Purchased Equipment for $65,000 with a Salvage Value