Question

Coronado Company purchased equipment on January 1, 2020, at a total invoice cost of $1160000. The equipment has an estimated salvage value of $34000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2021, if the straight-line method of depreciation is used?

Answer 1

$450,400

Step-by-step explanation:

Using the straight line method

Purchased asset on January 1, 2020

Total cost of asset = $1,160,000

Salvage value = $34,000

Useful life = 5 year

Annual depreciation is the allocation of cost to the use of the asset. When added every year, it gives the accumulated depreciation.

Annual depreciation = ($1,160,000 - $34,000)/5

= $1,126,000/5

= $225,200

Between January 1, 2020 and December 31, 2021 is two years. That means the accumulated depreciation equals 2 years depreciation

Accumulated depreciation at December 31, 2021

= $225,200 × 2

= $450,400