On January 2, 2006, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. What is the balance in Accumulated Depreciation on December 31, 2007, if KJ Corporation uses the straight- line method of depreciation?

Question

Quizplus · Accepted Answer

The straight-line depreciation method calculates annual depreciation by subtracting the residual value from the cost and dividing by the useful life. For KJ Corporation, this is ($260,000 - $20,000) / 5 = $48,000 per year. Over two years (2006 and 2007), the accumulated depreciation would be $48,000 * 2 = $96,000.

On January 2, 2006, KJ Corporation Acquired Equipment for $260,000