On January 2, 2012 McNally's Extra Corporation acquired equipment for $120,000. The estimated life of the equipment is 5 years or 20,000 hours. The estimated residual value is $20,000. If McNally's Extra Corporation uses the straight-line method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2013, during which period the asset was used 4,500 hours?

Question

Quizplus · Accepted Answer

The straight-line method of depreciation calculates annual depreciation as (Cost - Residual Value) / Useful Life. For this equipment: ($120,000 - $20,000) / 5 years = $20,000 per year.

On January 2, 2012 McNally's Extra Corporation Acquired Equipment for $120,000