Question

Lido Pizza purchased a new oven that cost $15,000 cash on January 2, 2016. The oven has an expected useful life of five years and an estimated salvage value of $3,000. Tony's uses straight-line depreciation to make adjusting entries each December 31. What amount of accumulated depreciation would Lidos report on the 2017 balance sheet?

Answer 1

$4,800

Step-by-step explanation:

The computation of the accumulated depreciation would Lidos report on the 2017 balance sheet is shown below:

= (Purchase value of new oven- estimated salvage value ) ÷ (expected useful life)

= ($15,000 - $3,000) ÷ (5 years)

= ($12,000) ÷ (5 years)

= $2,400

Now for 2017, the accumulated depreciation is

= Depreciation expense × number of years

= $2,400 × 2 years

= $4,800