On October 1, 2010, Holt Company places a new asset into service. The cost of the asset is $60,000 with an estimated 5-year life and $15,000 salvage value at the end of its useful life. What is the depreciation expense for 2010 if Holt Company uses the straight-line method of depreciation?
A) $2,250
B) $12,000
C) $3,000
D) $6,000

Question

Quizplus · Accepted Answer

Depreciation expense = (Cost of asset - Salvage value) / Useful life= (60,000 - 15,000) / 5= 45,000 / 5= $9,000Depreciation expense for 2010 = 9,000 * (10/12)= $7,500Since the asset was placed in service on October 1, 2010, the depreciation expense for 2010 is only for 10 months.Therefore, the depreciation expense for 2010 is $7,500 * (10/12) = $6,250.

On October 1, 2010, Holt Company Places a New Asset