Question

A company purchased factory equipment on June 1, 2021, for $160,000. It is estimated that the equipment will have a $10,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2021, is

Answer 1

$8,750

Step-by-step explanation:

The computation of the depreciation expense under the straight-line method is shown below:

= (Original cost - salvage value) ÷ (useful life)

= ($160,000 - $10,000) ÷ (10 years)

= ($150,000) ÷ (10 years)

= $15,000

In this method, the depreciation is same for all the remaining useful life\

Now for the 7 months, the depreciation expense would be

= $15,000 × 7 months÷ 12 months

= $8,750

The 7 months is computed from July 1 to December 31