On October 1, 2021, Holt Company places a new asset into service.The cost of the asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of its useful life.What is the depreciation expense for 2021 if Holt Company uses the straight-line method of depreciation?

Question

Quizplus · Accepted Answer

The straight-line depreciation expense is calculated by subtracting the salvage value from the cost of the asset and then dividing by the useful life. Here, ($120,000 - $30,000) / 5 = $18,000 per year. Since the asset was placed into service on October 1, only 3 months of depreciation applies for 2021, so $18,000 / 12 * 3 = $4,500.

On October 1, 2021, Holt Company Places a New Asset