The Samuel Company uses the straight-line method to depreciate its equipment. On May 1, 2015, the company purchased some equipment for $224,000. The equipment is estimated to have a useful life of ten years and a salvage value of $20,000. On December 31, 2015, how much depreciation expense should Samuel record for the equipment in the adjusting entry?
A) $20,400
B) $18,500
C) $13,600
D) $8,500

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life = ($224,000 - $20,000) / 10 = $20,400 per year. Since the equipment was purchased on May 1, 2015, and the depreciation expense is being calculated for the year ending December 31, 2015, only 8 months of depreciation should be accounted for. Thus, the depreciation expense for 2015 is $20,400 * (8/12) = $13,600.

The Samuel Company Uses the Straight-Line Method to Depreciate Its