On May 1, 2010, Pinkley Company sells office furniture for $90,000 cash. The office furniture originally cost $225,000 when purchased on January 1, 2003. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $22,500. What depreciation expense should be recorded on this asset in 2010?

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life = ($225,000 - $22,500) / 10 = $20,250. Since the asset is sold on May 1, 2010, only 4 months of depreciation is recorded for 2010: $20,250 * (4/12) = $6,750.

On May 1, 2010, Pinkley Company Sells Office Furniture for $90,000