Question

On May 1, 2015, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2008. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. What depreciation expense should be recorded on this asset in 2015?a. $22,500.

b. $90,000.
c. $45,000.
d. $47,500.

Answer 1

a. $22,500

Step-by-step explanation:

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

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

= ($750,000 - $75,000) ÷ (10 years)

= ($675,000) ÷ (10 years)

= $67,500

In this method, the depreciation is same for all the rest of the useful life

Now for 4 months, it would be

= $67,500 × 4 months ÷ 12 months

= $22,500

The four months is calculated from January 1 to May 1