The Samuel Company uses the straight-line method to depreciate its equipment. On May 1, 2014, the company purchased some equipment for $224,000. The equipment is estimated to have a useful life of ten years and a salvage value of $20,000. If depreciation is to be recorded for each month the equipment is owned, how much depreciation expense should Samuel record for the equipment in the adjusting entry on December 31, 2014?

Question

Quizplus · Accepted Answer

The depreciation expense for each full year can be calculated as follows:

Depreciation expense = (Cost - Salvage value) / Useful life 
Depreciation expense = ($224,000 - $20,000) / 10 
Depreciation expense = $20,400

Since the equipment is owned for only 8 months in 2014 (May to December), the depreciation expense for 2014 can be calculated as:

Depreciation expense = ($20,400 / 12) x 8 
Depreciation expense = $13,600

Therefore, the answer is C) $13,600.

The Samuel Company Uses the Straight-Line Method to Depreciate Its