Lacy purchased equipment for $77,000 on January 1.Its residual value is $5,000 with a useful life of 9 years.The amount of depreciation expense in the first year under the straight-line method is:

Question

Quizplus · Accepted Answer

First, we need to calculate the annual depreciation expense:
($77,000 - $5,000) / 9 years = $8,000 per year
Since Lacy purchased the equipment on January 1, we need to prorate this amount for the first year:
$8,000 / 12 months = $666.67 per month
To find the depreciation expense for the first year, we need to multiply the monthly amount by the number of months in the first year:
$666.67 x 12 months = $8,000
Therefore, the correct answer is option B.

Lacy Purchased Equipment for $77,000 on January 1