A company purchased factory equipment on May 1, 2018 for $30,000. It is estimated that the equipment will have a $4,200 residual value at the end of its 8-year useful life. Using straight-line depreciation, the depreciation expense for the years ended December 31, 2018 and 2019 is
A) $2,500 in 2018 and $3,750 in 2019.
B) $3,225 in 2018 and $3,225 in 2019.
C) $2,150 in 2018 and $3,225 in 2019.
D) none of the above

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as ($30,000 - $4,200) / 8 = $3,225. For 2018, depreciation is for 8 months (May to December), so $3,225 * (8/12) = $2,150. For 2019, it's the full year, so $3,225.

A Company Purchased Factory Equipment on May 1, 2018 for $30,000