Final answer:
The accumulated depreciation of the equipment by December 31, 2023, is $18,000, calculated by the straight-line method applied to half of 2022 and the full year of 2023. Subtracting this from the original cost of $60,000, the carrying amount is $42,000. Answer A is correct.
Step-by-step explanation:
The question revolves around calculating the accumulated depreciation and carrying amount of equipment purchased on July 1, 2022, with a life expectancy of 5 years, by December 31, 2023. To find the accumulated depreciation, we first determine the annual depreciation expense. Since the cost of the equipment is $60,000 and it has a 5-year life, straight-line depreciation leads us to an annual expense of $60,000 divided by 5, which is $12,000 per year. However, since the equipment was purchased on July 1, 2022, for the first year, we only account for half of the year (6 months). Therefore, the accumulated depreciation at the end of 2022 is $6,000. For the full year 2023, the entire annual depreciation of $12,000 is applied. So, accumulated depreciation by December 31, 2023, will be $6,000 (for half of 2022) plus $12,000 (for the full year of 2023), totaling $18,000. The carrying amount is calculated by subtracting the accumulated depreciation from the cost of the equipment, which gives us $60,000 - $18,000, amounting to $42,000. Hence, the correct answer is A: the accumulated depreciation would be $18,000 and the carrying amount would be $42,000.