A company purchased a computer system on March 1, 2012. Its cost was $35,000 and it had an estimated residual value of $5,000. It was expected to have a useful life for four years. To the nearest dollar, the depreciation for 2012 using straight-line depreciation will be:

Question

Quizplus · Accepted Answer

The annual depreciation for straight-line depreciation can be calculated using the formula:

Depreciation expense = (cost - residual value) / useful life

In this case, the cost is $35,000, residual value is $5,000, and the useful life is 4 years.

Depreciation expense = ($35,000 - $5,000) / 4 = $7,500

However, since the computer system was purchased on March 1, 2012, it was only in use for 10 months (March to December) in 2012. Therefore, the depreciation for 2012 will be:

Depreciation for 2012 = Depreciation expense x (10/12) = $7,500 x 0.83 = $6,250

Rounding to the nearest dollar gives us the answer of $6,250.

A Company Purchased a Computer System on March 1, 2012