On May 1, 2014, Pinkley Company sells office furniture for €60,000 cash. The office furniture originally cost €150,000 when purchased on January 1, 2006. Depreciation is recorded by the straight-line method over 10 years with a residual value of €15,000. What depreciation expense should be recorded on this asset in 2014?

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as (Cost - Residual Value) / Useful Life = (€150,000 - €15,000) / 10 = €13,500. Since the asset is sold on May 1, 2014, only 4 months of depreciation should be recorded for 2014: (€13,500 / 12) * 4 = €4,500.

On May 1, 2014, Pinkley Company Sells Office Furniture for €60,000