Double Nickels Company purchased equipment for $9,000 on January 1, 2022.The company expects to use the equipment for three years.It has no salvage value.Monthly depreciation expense on the asset is

Question

Quizplus · Accepted Answer

The depreciation expense can be calculated using the straight-line depreciation method.

Depreciation expense = (Cost of the asset - Salvage value) / Useful life

In this case, the cost of the equipment is $9,000 and there is no salvage value, so the numerator of the equation is simply $9,000. The useful life is given as three years, but we need to convert that to months since we want the monthly depreciation expense.

Useful life in months = Useful life in years x 12

Useful life in months = 3 x 12 = 36

Now we can plug in the numbers:

Depreciation expense = ($9,000 - $0) / 36

Depreciation expense = $250

Therefore, the monthly depreciation expense is $250. Choice B is correct.

Double Nickels Company Purchased Equipment for $9,000 on January 1