Question

on october 15, 2017, pattie purchased some equipment costing $300,000 with no residual value, and expected to use it for 5 years. her company, which has a december 31 year end, adopted a depreciation policy that calls for no depreciation in the year of acquisition and a full year's depreciation in the year of disposal. what would be the amount of accumulated depreciation for this equipment after adjusting entries were made on december 31, 2020? assume straight-line depreciation.select answer from the options below$180,000$192,500$240,000$195,000

Answer 1

The accumulated depreciation for the equipment after adjusting entries were made on December 31, 2020 will be $180,000.

Step-by-step explanation:

In this case, since the equipment was purchased on October 15, 2017, and her company has a December 31 year-end, no depreciation will be recorded for that particular year. However, for the subsequent years, the straight-line depreciation method will be used. This means that the $300,000 cost will be spread evenly over the 5-year useful life of the equipment. The accumulated depreciation is simply the total depreciation recorded over the years.

To calculate the annual depreciation, we divide the cost ($300,000) by the useful life (5 years), resulting in $60,000 of depreciation per year. Since the equipment was purchased on October 15, 2017, it will have been used for 3 years by December 31, 2020. Therefore, the accumulated depreciation will be $60,000 x 3 = $180,000.