Grover,Inc. Grover,Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years,or 12,500 hours of operation.The crane was purchased on January 1,2013 and was used 2,700 hours in 2013 and 2,600 hours in 2014.
Refer to the information about Grover,Inc.
What amount will Grover,Inc.report as depreciation expense over the 8-year life of the equipment?

Question

Quizplus · Accepted Answer

To calculate the annual depreciation expense, we need to determine the depreciable cost of the crane. 
Depreciable cost = Cost of equipment - Residual value
Depreciable cost = $80,000 - $5,000 = $75,000

Next, we need to determine the annual depreciation expense using the straight-line method. 
Depreciation expense = Depreciable cost / Useful life
Depreciation expense = $75,000 / 8 years = $9,375 per year

Over the 8-year life of the equipment, the total depreciation expense will be:
Total depreciation expense = Annual depreciation expense x Number of years
Total depreciation expense = $9,375 x 8 years = $75,000

Therefore, the correct answer is (C) $75,000.