On May 1, 2011, 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 residual value of €22,500.What depreciation expense should be recorded on this asset in 2011?

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as (Cost - Residual Value) / Useful Life = (€225,000 - €22,500) / 10 = €20,250. Since the furniture is sold on May 1, 2011, only 4 months of depreciation is recorded for 2011: (€20,250 / 12) * 4 = €6,750.

On May 1, 2011, Pinkley Company Sells Office Furniture for €90,000