On January 4,2012,Mary's Cafe acquired equipment for $200,000.The estimated life of the equipment is 8 years or 60,000 hours.The estimated residual value is $10,000.What is the balance in the Accumulated Depreciation account at December 31,2013 if the straight-line method is used?

Question

Quizplus · Accepted Answer

Using the straight-line method, we can calculate the annual depreciation as:
Depreciation = (Cost - Residual Value) / Estimated Life
=$ (200,000 - 10,000) / 8
= $ 23,750 per year
For the period from January 4, 2012, to December 31, 2013, there are 2 years of depreciation.
Accumulated Depreciation = Depreciation x Number of Years
= $23,750 x 2
= $47,500
Therefore, the balance in the Accumulated Depreciation account at December 31, 2013, is $47,500. Option C is the correct answer.

On January 4,2012,Mary's Cafe Acquired Equipment for $200,000