On October 1, 2015, Holt Company places a new asset into service. The cost of the asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of its useful life. What is the depreciation expense for 2015 if Holt Company uses the straight-line method of depreciation?
A)$4,500
B)$24,000
C)$6,000
D)$12,000

Question

Quizplus · Accepted Answer

The straight-line depreciation method calculates annual depreciation by subtracting the salvage value from the cost and dividing by the useful life. For 2015, since the asset was placed into service on October 1, only 3 months of depreciation is recorded: (($120,000 - $30,000) / 5 years) * (3/12) = $4,500.

On October 1, 2015, Holt Company Places a New Asset