On 2 March 2013, Glen Industries purchased two automobiles at a cost of $550,000. The cars are to be depreciated by the straight-line method over five years with no salvage value. Glen uses the half-year convention to compute depreciation for fractional periods. The book value of the two automobiles at 31 December 2014 will be:

Question

Quizplus · Accepted Answer

Using the half-year convention, the first year of depreciation is calculated as (550,000/5) * 6/12 = $55,000 for each car. The second year of depreciation is also $55,000 for each car. Therefore, the total accumulated depreciation for both cars at 31 December 2014 is $220,000. 
The book value of the two automobiles at 31 December 2014 is calculated as follows: 
Cost of both cars = $550,000 
Accumulated depreciation = $220,000 
Book value = $330,000 (for both cars) 
Therefore, the correct answer is D) $385,000, which is the book value of two cars.

On 2 March 2013, Glen Industries Purchased Two Automobiles at a Cost