A company purchased factory equipment on June 1 2017 for $160000. It is estimated that the equipment will have a $10000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation the amount to be recorded as depreciation expense at December 31 2017 is

Question

Quizplus · Accepted Answer

The straight-line depreciation method calculates equal depreciation expenses each year over the useful life of the equipment. The formula is: (Cost - Salvage Value) / Useful Life. For this equipment, the depreciation per year is ($160,000 - $10,000) / 10 = $15,000 per year. Since the equipment was purchased on June 1, only 7 months of depreciation should be accounted for in 2017. Therefore, the depreciation expense for 2017 is $15,000 * (7/12) = $8,750.

A Company Purchased Factory Equipment on June 1 2017 for $160000