Drago Company purchased equipment on January 1, 2021, at a total invoice cost of $1,200,000.The equipment has an estimated salvage value of $30,000 and an estimated useful life of five years.What is the amount of accumulated depreciation at December 31, 2022, if the straight-line method of depreciation is used?

Question

Quizplus · Accepted Answer

The annual straight-line depreciation expense is calculated as follows: 
Depreciation expense = (Cost - Salvage value) / Useful life 
= ($1,200,000 - $30,000) / 5 
= $234,000

Accumulated depreciation at December 31, 2022, will be equal to the cumulative depreciation expense from January 1, 2021, to December 31, 2022, which is:

Year 1: $234,000 
Year 2: $234,000 
Accumulated depreciation at December 31, 2022, = Year 1 depreciation expense + Year 2 depreciation expense 
= $234,000 + $234,000 
= $468,000

Therefore, the correct answer is D.

Drago Company Purchased Equipment on January 1, 2021, at a Total