Question

Cramer Company purchased equipment on May 1, 2019 for $200,000. The residual value is $20,000 and the estimated useful life is 10 years. What is the Depreciation Expense for the year ending December 31, 2019, if the company uses the straight-line method? (Round your final answer to the nearest dollar.)

Answer 1

Depreciation expense 2019= $12,000

Step-by-step explanation:

Giving the following information:

Cramer Company purchased equipment on May 1, 2019, for $200,000. The residual value is $20,000 and the estimated useful life is 10 years.

Under the straight-line method of depreciation, we need to use the following formula to calculate the annual depreciation:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (200,000 - 20,000)/10= 18,000

Now, we need to calculate the depreciation for 8 months:

Depreciation expense 2019= (18,000/12)*8= $12,000