On April 1, 2010, Pierre Company (a calendar-year firm) purchased a new machine for $12,000. The machine had a useful life of 5 years and a salvage value of $2,000. Pierre uses straight-line depreciation. Depreciation for 2010 is

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Quizplus · Accepted Answer

The depreciation expense is calculated by subtracting the salvage value from the cost and then dividing by the useful life. ($12,000 - $2,000) / 5 = $2,000 per year. Since the machine was purchased on April 1, only 9 months of depreciation should be accounted for in 2010, which is $2,000 * (9/12) = $1,500.

On April 1, 2010, Pierre Company (A Calendar-Year Firm) Purchased