Question

Micah Bartlett Company purchased equipment on January 1, 2014, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. The amount of accumulated depreciation at December 31, 2015, if the straight-line method of depreciation is used, is

Answer 1

Using the straight-line method of depreciation, the accumulated depreciation at December 31, 2015, for the equipment will be $156,000.

Step-by-step explanation:

The accumulated depreciation at December 31, 2015, can be calculated using the straight-line method. Straight-line depreciation evenly distributes the depreciation expense over the useful life of the equipment. To calculate the annual depreciation expense, subtract the salvage value from the total cost and divide by the useful life. In this case, the annual depreciation expense would be ($400,000 - $10,000) / 5 = $78,000. To find the accumulated depreciation at December 31, 2015, multiply the annual depreciation expense by the number of years since the equipment was purchased. In this case, 2014 and 2015, so 2 years:

Accumulated Depreciation at December 31, 2015 = $78,000 x 2 = $156,000.