Laurey's Pet Emporium purchased equipment on January 1 for $35,000. The equipmentwill be used for five years, after which the estimated residual value will be $2,000. Using straight-line depreciation, what is the depreciation expense for the first year of the asset's life?

Question

Quizplus · Accepted Answer

To calculate straight-line depreciation, we need to subtract the estimated residual value from the initial cost, and then divide by the useful life of the asset.

Initial cost - residual value = depreciable cost 
$35,000 - $2,000 = $33,000

Depreciable cost / useful life = depreciation expense per year 
$33,000 / 5 = $6,600

Therefore, the depreciation expense for the first year is $6,600. Answer choice C is correct.

Laurey's Pet Emporium Purchased Equipment on January 1 for $35,000