Question

machinery costing 90,000 with an estimated salvage value of $6,000 and an estimated life of 4 years was purchased on October 31, 2001. using the straight line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 2001?

Answer 1

The depreciation expense for the machinery for the two months from October 31, 2001, to December 31, 2001, using the straight-line method, is $3,500.

Step-by-step explanation:

Calculating Depreciation Expense

The question involves calculating the depreciation expense of machinery using the straight-line method of depreciation. The total cost of the machinery is $90,000, with an estimated salvage value of $6,000 and a useful life of 4 years. The depreciation expense is calculated as follows:

Annual Depreciation Expense = (Cost - Salvage Value) / Useful Life

Annual Depreciation Expense = ($90,000 - $6,000) / 4

= $21,000 per year

Since the machinery was purchased on October 31, 2001, and the depreciation expense must be recorded at December 31, 2001, we need to calculate the expense only for the months of November and December. Therefore, the depreciation expense for 2 months is:

Depreciation Expense for 2 months = Annual Depreciation Expense / 12 months * 2 months

Depreciation Expense for 2 months = $21,000 / 12 * 2

= $3,500