Question

Emir Company purchased equipment that cost $110,000 cash on January 1, Year 1. The equipment had an expected useful life of six years and an estimated salvage value of $8,000. Assuming that Emir depreciates its assets under the straight-line method, the amount of depreciation expense shown on the income statement prepared for Year 4 and the amount of accumulated depreciation shown on the balance sheet prepared as of December 31, Year 4, respectively, would be: Depreciation expense Accumulated depreciation A. $17,000 $17,000 B. $17,000 $68,000 C. $68,000 $17,000 D. $17,000 $51,000

Answer 1

Annual depreciation= $17,000

Accumulated depreciation= $68,000

Step-by-step explanation:

Giving the following information:

Purchase price= $110,000

Useful life= 6 years

Salvage value= $8,000

First, we need to calculate the annual depreciation under the straight-line method. The depreciation expense remains constant during a useful life.

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

Annual depreciation= (110,000 - 8,000) / 6

Annual depreciation= $17,000

Now, the accumulated depreciation after 4 years:

Accumulated depreciation= 17,000*4= $68,000