On October 1 2017 Holt Company places a new asset into service. The cost of the asset is $120000 with an estimated 5-year life and $30000 salvage value at the end of its useful life. What is the depreciation expense for 2017 if Holt Company uses the straight-line method of depreciation?
A) $4500
B) $24000
C) $6000
D) $12000

Question

Quizplus · Accepted Answer

The annual depreciation expense using the straight-line method is calculated as (Cost - Salvage Value) / Useful Life. For 2017, the asset is in service for 3 months, so the expense is ($120,000 - $30,000) / 5 * (3/12) = $4,500.

On October 1 2017 Holt Company Places a New Asset