Question

A company that uses accrual-basis accounting purchased equipment on July 1 of the current year for $20,000. The company expects to use the equipment consistently for four years, and will record ________ depreciation in its December 31 financial statements.

Answer 1

$2,500

Step-by-step explanation:

Acquisition cost = $20,000

Expected useful life = 4 years

Therefore, annual depreciation =
`(Cost)/(Useful Life) =(20,000)/(4) = 5,000`

However, given that there are 6 months from July 1 (the date of acquisition) to December 31 (the end of the period), the amount of depreciation to be recorded within that period

=
`(6 Months)/(12 Months) * Annual Depreciation`

= 6/12 * 5,000

= $2,500.