Bricker Enterprises purchased a machine for $100,000 on October 1,2015.The estimated service life is ten years with a $10,000 residual value.Bricker records partial-year depreciation based on the number of months in service.Depreciation expense for the year ended December 31,2015,using straight-line depreciation,is:

Question

Quizplus · Accepted Answer

Using the straight-line method, depreciation per year would be calculated as follows:

Depreciable Cost = Cost of Machine - Residual Value 
Depreciable Cost = $100,000 - $10,000 
Depreciable Cost = $90,000

Annual Depreciation Expense = Depreciable Cost / Useful Life
Annual Depreciation Expense = $90,000 / 10
Annual Depreciation Expense = $9,000

Since the machine was purchased on October 1st, it was in service for only 3 months in the current year. Therefore, the partial-year depreciation would be calculated as:

Partial-Year Depreciation Expense = ((Annual Depreciation Expense) / 12) * (Number of Months in Service) 
Partial-Year Depreciation Expense = (($9,000) / 12) * (3) 
Partial-Year Depreciation Expense = $2,250

Thus, the depreciation expense for the year ended December 31, 2015, using straight-line depreciation, is $2,250. Therefore, the best choice is C.

Bricker Enterprises Purchased a Machine for $100,000 on October 1,2015