Francisco owns a machine that it purchased on July 1, 2010 for $600,000. The machine had an estimated useful life of 8 years and an estimated residual value of $10,000. The company uses straight-line depreciation and records monthly depreciation. The machine was sold on December 31, 2015 for $350,000. What was the depreciation expense for 2010?

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as (Cost - Residual Value) / Useful Life = ($600,000 - $10,000) / 8 = $73,750. Since the machine was purchased on July 1, 2010, only half a year of depreciation is recorded for 2010: $73,750 / 2 = $36,875.

Francisco Owns a Machine That It Purchased on July 1