Final answer:
Using the straight-line depreciation method, the depreciation expense for Hot Wort Ltd. for the year ending December 31, 2017, for equipment purchased on April 1, 2017, is $15,000, as it must be prorated for 9 months of use within the year.
Step-by-step explanation:
The question is asking to calculate the depreciation expense for the year ending December 31, 2017, using the straight-line method for an equipment purchased by Hot Wort Ltd. To compute this, we must first determine the annual depreciation expense by subtracting the residual value from the cost of the equipment and dividing by the estimated useful life. The cost of the equipment is $140,000, and the residual value is $20,000. The estimated life is 6 years.
Annual Depreciation Expense = (Cost - Residual value) / Useful life = ($140,000 - $20,000) / 6 = $120,000 / 6 = $20,000.
Since the equipment was purchased on April 1, 2017, we must prorate the annual depreciation for the 9 months of use in the year 2017. Therefore, the depreciation expense for 2017 is ($20,000 / 12 months) * 9 months = $15,000.
The correct answer is c) $15,000, which is the depreciation expense for Hot Wort Ltd. for the year ending December 31, 2017 when using the straight-line depreciation method.