Question

A company acquired equipment on April 1, Year 1, for $18,500. The company estimates a residual value of $2,100 and a five-year service life. Required: Calculate depreciation expense using the straight-line method for Year 1 and Year 2, assuming a December 31 year-end.

Answer 1

Results are below.

Step-by-step explanation:

Giving the following information:

Purchase price= $18,500

Useful life= 5 years

Residual value= $2,100

First, we need to calculate the annual depreciation using the following formula:

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

Annual depreciation= (18,500 - 2,100) / 5

Annual depreciation= $3,280

Year 1:

Annual depreciation= (3,280/12)*9= $2,460

Year 2:

Annual depreciation= $3,280