Assume Lloyd uses straight-line depreciation with the half-year convention. Depreciation expense to be recognized in 2009 (the year of purchase) is:
A) $7,400.
B) $8,400.
C) $3,700.
D) Some other amount.

Question

Quizplus · Accepted Answer

The half-year convention means that depreciation for the year of purchase is only recognized for half of the year. In this case, the asset was purchased on July 1st, so only 6 months of depreciation will be recognized in 2009. The annual depreciation expense is ($37,000 - $2,000)/5 = $7,000, so the half-year depreciation expense is $7,000/2 = $3,500. Therefore, the depreciation expense to be recognized in 2009 is $3,500.

Assume Lloyd Uses Straight-Line Depreciation with the Half-Year Convention