Question

A company purchased factory equipment on april 1, 2020 for $160,000. it is estimated that the equipment will have a $20,000 salvage value at the end of its 10-year useful life. using the straight-line method of depreciation, the amount to be recorded as depreciation expense at december 31, 2020 is group of answer choices

-$12,000.
-$10,500.
-$16,000.
-$14,000.

Answer 1

The depreciation expense recorded at December 31, 2020, using the straight-line method for the factory equipment purchased on April 1, 2020, would be $10,500 (option 2), which accounts for 9 months of depreciation within the fiscal year.

Step-by-step explanation:

To calculate the depreciation expense for the factory equipment using the straight-line method of depreciation, we subtract the salvage value from the cost of the equipment and then divide by the useful life of the asset. So, the calculation will be as follows:

• Cost of the Equipment: $160,000
• Salvage Value: $20,000
• Useful Life: 10 years

The annual depreciation expense is calculated by: (Cost of the Equipment - Salvage Value) / Useful Life. Hence, $160,000 - $20,000 = $140,000 total depreciation over 10 years, which equals $14,000 annual depreciation.

Since the equipment was purchased on April 1st, 2020, and we need to find the depreciation expense for the fiscal year ending December 31st, 2020, we account for 9 months of depreciation. The calculation is: $14,000 * (9/12) = $10,500.

Therefore, the depreciation expense recorded at December 31, 2020, would be $10,500.