On March 2,2014,Glen Industries purchased a fleet of 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 fleet of automobiles at December 31,2015,will be:
A)$165,000.
B)$330,000.
C)$495,000.
D)$385,000.

Question

Quizplus · Accepted Answer

Using the straight-line depreciation method, the annual depreciation for the fleet of automobiles would be $550,000 ÷ 5 = $110,000. 
Using the half-year convention, the depreciation for the first year would be ($110,000 ÷ 2) = $55,000.
For the second year, the remaining book value would be ($550,000 - $55,000) = $495,000. 
Therefore, the depreciation for the second year would also be ($110,000 ÷ 2) = $55,000. 
The book value at December 31, 2015, would be ($495,000 - $55,000) = $440,000.
Thus, the correct answer is D) $385,000, which is the remaining book value at December 31, 2015, after deducting the two years of accumulated depreciation.

On March 2,2014,Glen Industries Purchased a Fleet of Automobiles at a Cost