A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the straight-line method, the balance in the accumulated deprecation account, after the second year, will be

Question

Quizplus · Accepted Answer

Under the straight-line method, the annual depreciation expense is calculated by dividing the depreciable cost (cost - salvage value) by the useful life.

Depreciable cost = $50,000 - $5,000 = $45,000 
Annual depreciation expense = $45,000 ÷ 5 years = $9,000

After two years, the total accumulated depreciation would be $18,000 ($9,000 x 2), so the balance in the accumulated depreciation account would be $18,000.

Therefore, the correct answer is B) $18,000.

A Firm Purchases an Asset for $50,000 and Estimates That