A company purchased new furniture at a cost of $14,000 on September 30. The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000. The company uses the straight-line method of depreciation.
-What is the book value of the furniture on December 31 of the first year?

Question

A company purchased new furniture at a cost of $14,000 on September 30. The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000. The company uses the straight-line method of depreciation. 
-What is the book value of the furniture on December 31 of the first year?

Quizplus · Accepted Answer

The annual depreciation is ($14,000 - $2,000) / 8 = $1,500. For three months (October to December), the depreciation is $1,500 * (3/12) = $375. The book value on December 31 is $14,000 - $375 = $13,625.

A Company Purchased New Furniture at a Cost of $14,000