Hickman Company purchases a piece of equipment on Jan.2,2013,for $60,000.The equipment has an estimated life of eight years or 50,000 units of production and an estimated residual value of $6,000.Hickman uses a calendar fiscal year.The entry to record the amount of depreciation for 2013,using the straight-line method,is:

Question

Quizplus · Accepted Answer

To calculate depreciation using the straight-line method, we need to subtract the residual value from the cost of the asset and then divide that by the estimated life or units of production.

In this case, the calculation would be: 
($60,000 - $6,000) / 8 years = $6,750 per year

Therefore, the correct entry to record depreciation expense for 2013 would be: 
Depreciation Expense - Equipment $6,750 
Accumulated Depreciation - Equipment $6,750

Option A is incorrect because it only records half of the depreciation expense for 2013. 
Option C is incorrect because it assumes the equipment will produce the same amount of units each year, which may not be the case. 
Option D is incorrect because it does not record the depreciation expense, only the accumulated depreciation.

Hickman Company Purchases a Piece of Equipment on Jan