A company purchased factory equipment on May 1, 2015 for $30,000.It is estimated that the equipment will have a $4,200 residual value at the end of its 8-year useful life.Using straight-line depreciation, the depreciation expense for the years ended December 31, 2015 and 2016 is
A)$2,500 in 2015 and $3,750 in 2016.
B)$3,225 in 2015 and $3,225 in 2016.
C)$2,150 in 2015 and $3,225 in 2016.
D)None of the above.

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as ($30,000 - $4,200) / 8 = $3,225. For 2015, depreciation is for 8 months (May to December), so $3,225 * (8/12) = $2,150. For 2016, it's the full year, so $3,225.

A Company Purchased Factory Equipment on May 1, 2015 for $30,000.It