Cardco Inc.has an annual accounting period that ends on December 31.During the current year a depreciable asset that cost $42,000 was purchased on September 2.The asset has a $4,000 estimated salvage value.The company uses straight-line depreciation and expects the asset to have a five-year life.What is the total depreciation expense for the current year?
A)$1,900.00
B)$7,600.00
C)$2,533.33
D)$2,800.00
E)$3,166.67

Question

Quizplus · Accepted Answer

First, we need to calculate the depreciation expense per year. 
Cost of asset = $42,000 
Salvage value = $4,000 
Depreciable cost = $42,000 - $4,000 = $38,000 
Useful life = 5 years 
Depreciation expense per year = Depreciable cost / Useful life 
Depreciation expense per year = $38,000 / 5 = $7,600

Since the asset was purchased on September 2nd, it was used for 120/365 days in the current year. 
Depreciation expense for the current year = Depreciation expense per year * (Number of days asset was used in current year / Total days in year) 
Depreciation expense for the current year = $7,600 * (120/365) 
Depreciation expense for the current year = $2,533.33

Therefore, the total depreciation expense for the current year is $2,533.33. Option C is the correct answer.