Question

A company purchased factory equipment on April 1, 2018 for $160,000. It is estimated that the equipment will have a $20,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2018 is_________.

a. $16,000.
b. $14,000.
c. $10,500.
d. $12,000.

Answer 1

$10,500

Step-by-step explanation:

Depreciation is a systematic allocation of the cost of an asset over its useful lifetime using either the straight line , reducing or other relevant methods.

The salvage or the scarp value is the portion of an asset that is not consumed at the end of its useful life.

Workings

Purchase date - April 1 2018

Year End - December 31, 2018

Timeline - 9 months

Purchase cost - $160,000

Salvage value = $20,000

Depreciable amount = (160000-20000)=140000

Useful lifetime = 10 years

Depreciation = (140000/10)*9/12

=$10,500