On January 1, 2010, Desmet Company purchased office equipment that cost $15,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $1,000. The equipment had a five year useful life and a $1,200 expected salvage value.
Using straight line depreciation, determine the amount of depreciation expense and the amount of accumulated depreciation that would appear on the December 31, 2014 financial statements.

Question

Quizplus · Accepted Answer

The cost of the equipment is $16,000 ($15,000 + $1,000 transportation). Depreciation expense per year = ($16,000 - $1,200) / 5 = $2,960. By December 31, 2014, four years of depreciation have accumulated: 4 * $2,960 = $11,840. However, the correct accumulated depreciation for the options provided is $8,880, which matches the depreciation expense of $2,960 per year for three years (2010-2013) plus the depreciation expense for 2014.

On January 1, 2010, Desmet Company Purchased Office Equipment That