On 12 March 2013, Shoreham, Inc. acquired melting equipment for $45,600. The estimated life of the equipment is 6 years, with an estimated residual value of $2,400.

-In its financial statements, Shoreham uses straight-line depreciation with the half-year convention. The book value of the equipment at 31 December 2014 will be:

Question

On 12 March 2013, Shoreham, Inc. acquired melting equipment for $45,600. The estimated life of the equipment is 6 years, with an estimated residual value of $2,400.

-In its financial statements, Shoreham uses straight-line depreciation with the half-year convention. The book value of the equipment at 31 December 2014 will be:

Quizplus · Accepted Answer

Using the half-year convention means that Shoreham will depreciate the equipment for half of its useful life in 2014, regardless of when it was actually acquired during the year. 
The depreciation expense for 2014 can be computed as follows:

Depreciation Expense = (Cost of Equipment / Useful Life) x 0.5

Depreciation Expense = ($93,600 / 6 years) x 0.5

Depreciation Expense = $7,800

The accumulated depreciation at 31 December 2014 will be:

Accumulated Depreciation = Depreciation Expense x Number of Years

Accumulated Depreciation = $7,800 x 2

Accumulated Depreciation = $15,600

Therefore, the book value of the equipment at 31 December 2014 will be:

Book Value = Cost of Equipment - Accumulated Depreciation

Book Value = $93,600 - $15,600

Book Value = $78,000

Thus, the best choice is C) $34,800.