Newco Publishing Company purchased equipment at the beginning of 2017 for $200,000.The company decided to depreciate the equipment over an eight-year period using the straight-line method.The company estimated the equipment's residual value at $20,000.The adjustment for depreciation expense for 2017 will

Question

Quizplus · Accepted Answer

The formula for calculating annual depreciation using the straight-line method is:

(Depreciation base – Residual value) / Useful life

Depreciation base = $200,000 – $20,000 = $180,000
Useful life = 8 years

Therefore, the annual depreciation expense is:

($180,000 – $20,000) / 8 = $22,500

The adjustment for depreciation expense for 2017 would be to increase Depreciation Expense and increase Accumulated Depreciation by $22,500. This means the answer is (D).

Newco Publishing Company Purchased Equipment at the Beginning of 2017