On January 1,2011,Fred McGriff Company bought office computers that cost $43,000,with an estimated useful life of 10 years and an estimated salvage value of $3,000.The company uses the straight-line method of depreciation and has a calendar yearend.For the year ended December 31,2011,McGriff Company will report depreciation expense of ________ on the ________.

Question

Quizplus · Accepted Answer

The company uses the straight-line method of depreciation, which means that each year, the same amount of depreciation expense will be recognized. The formula to calculate annual depreciation using this method is cost of asset - salvage value / useful life in years.

In this case, the annual depreciation expense would be ($43,000 - $3,000) / 10 years = $4,000.

Depreciation expense is reported on the income statement, so the correct answer is C) $4,000 on the income statement. It would not be reported on the statement of cash flows since it is a non-cash expense.

On January 1,2011,Fred McGriff Company Bought Office Computers That Cost