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The Milton Company purchased a depreciable asset for $350,000 on April 1, 2016. The estimated salvage value is $35,000, and the estimated useful life is 5 years. The straight-line method is used for depreciation. The balance in accumulated depreciation on May 1, 2019 when the asset is sold is

A. $194,250.
B. $126,000.
C. $173,250.
D. $147,000.

1 Answer

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Final answer:

The accumulated depreciation for the Milton Company's asset on May 1, 2019, is $194,250, calculated using the straight-line depreciation method over 3 years and 1 month.

Step-by-step explanation:

The Milton Company purchased a depreciable asset for $350,000, with an estimated salvage value of $35,000 and a useful life of 5 years. Using the straight-line depreciation method, we calculate annual depreciation by subtracting the salvage value from the purchase price and then dividing by the useful life. Therefore, the annual depreciation is ($350,000 - $35,000) / 5 = $63,000.

To find the accumulated depreciation on May 1, 2019, we consider 3 years and 1 month of depreciation since the purchase date on April 1, 2016. The accumulated depreciation for the full three years is 3 × $63,000 = $189,000. For the additional month, we calculate the monthly depreciation ($63,000 / 12) which equals $5,250 and add it to the three-year total, giving us $189,000 + $5,250 = $194,250. Based on the calculation, the correct balance in the accumulated depreciation account on May 1, 2019, is $194,250, which corresponds to answer choice A.

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