Question

On april 1st, 2017, craft company places a new asset into service. the cost of the asset is $80,000 with an estimated 5-year life and $20,000 salvage value at the end of its useful life. what is the depreciation expense for 2017 if craft company uses the straight-line method of depreciation and reports on calendar year basis?

a.$6,000
b.$3,000
c.$12,000
d.$9,000

Answer 1

c. $12,000 To calculate the straight-line depreciation per year, take the cost of the asset minus the salvage value and then divide the result by the estimated life of the asset. So: ($80,000 - $20,000) / 5 = $60,000/5 = $12,000 Therefore the correct answer is "c. $12,000"