Bricker Enterprises purchased a machine for $100,000 on October 1,2012.The estimated service life is ten years with a $10,000 residual value.Bricker records partial-year depreciation based on the number of months in service.Depreciation expense for 2012,using straight-line,is:

Question

Quizplus · Accepted Answer

The formula for straight-line depreciation is:

Depreciation expense = (Cost - Residual value) / Service life

In this case, the cost of the machine is $100,000 and the residual value is $10,000, and the service life is 10 years. Therefore:

Depreciation expense = ($100,000 - $10,000) / 10 = $9,000 per year

Since the machine was purchased on October 1, 2012, it was in service for 3 months (October, November, and December). Therefore, the partial-year depreciation for 2012 is:

Depreciation expense = ($9,000 / 12) x 3 = $2,250

So the correct answer is (C) $2,250.

Bricker Enterprises Purchased a Machine for $100,000 on October 1,2012