McCartney Company purchased a depreciable asset for $250,000 on April 1, 2005.The estimated salvage value is $25,000, and the estimated useful life is 5 years.The straight-line method is used for depreciation.What is the balance in accumulated depreciation on May 1, 2008 when the asset is sold?

Question

Quizplus · Accepted Answer

The annual depreciation expense using the straight-line method is ($250,000 - $25,000) / 5 = $45,000 per year. 
Accumulated depreciation from April 1, 2005 to April 1, 2008 (3 years) is 3 x $45,000 = $135,000. 
Since the asset is sold on May 1, 2008, one month of depreciation needs to be added, which is $45,000 / 12 = $3,750. 
Therefore, the balance in accumulated depreciation on May 1, 2008 is $135,000 + $3,750 = $138,750. 
Thus, the correct answer is option D.

McCartney Company Purchased a Depreciable Asset for $250,000 on April