On May 1, 2021, Pinkley Company sells office furniture for $300,000 cash.The office furniture originally cost $750,000 when purchased on January 1, 2021.Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000.What depreciation expense should be recorded on this asset in 2021?

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life = ($750,000 - $75,000) / 10 = $67,500. Since the asset was sold on May 1, 2021, depreciation for 4 months (January to April) should be recorded: $67,500 * (4/12) = $22,500.

On May 1, 2021, Pinkley Company Sells Office Furniture for $300,000